Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BRITISH WATERWAYS BILL

Lords Amendment considered and agreed to.

UNIVERSTTIES OF DURHAM AND NEWCASTLE UPON TYNE BILL

Lords Amendments considered and agreed to.

MEDWAY CONSERVANCY BILL

As amended, considered; to be read the Third time.

Oral Answers to Questions — TECHNICAL CO-OPERATION

British Aid to Commonwealth English

Sir R. Thompson: asked the Secretary for Technical Co-operation what progress is being made in implementing the scheme for British Aid to Commonwealth English announced at the second Commonwealth Education Conference last year.

The Secretary for Technical Co-operation (Mr. Robert Carr): The scheme envisaged the recruitment and training of 30 experts in the teaching of English who would be on the staff of the British Council. So far 10 of these additional specialists have been recruited and are now completing further training at British universities prior to taking up posts in six Commonwealth countries.

Sir R. Thompson: While welcoming what my right hon. Friend had to say about that, may I ask him whether in all these plans any provision has been made for the further teaching of Basic

English, which I believe to be the most potent means of simply teaching English to unsophisticated peoples which now exists?

Mr. Carr: While seeing the great merit in theory of what my hon. Friend says, we have found in practice that Basic English has so far proved a disappointing means of communication and that it is full English, as it were, which most people seem to want to learn.

United Nations (Technical Assistance)

Mr. Prentice: asked the Secretary for Technical Co-operation if he will review the British contribution to the United Nations Expanded Programme of Technical Assistance and to the Special Fund; if he will increase the contribution for the 1963 programme and pledge a large contribution for 1964; and if he will take steps to persuade other governments to do likewise.

Mr. Carr: The British contributions to these funds in 1963 were the result of a most careful review. They represent a 25 per cent. increase over 1962, and I fear that they must be regarded as final for this year. The level of contributions for 1964 will be considered in the autumn. Her Majesty's Government will certainly do their best to support the United Nations in its attempts to obtain contributions from its members.

Mr. Prentice: May I appeal to the right hon. Gentleman to think in terms of a big increase for 1964 when this matter is under review in the autumn? Will he acknowledge that when we supported the resolutions on the U.N. Development Decade eighteen months ago we pledged ourselves, and other countries pledged themselves, to a big expansion in this work, but until now expansion has not measured up to what was intended then? Can he think in terms of a big increase in 1964 and subsequent years?

Mr. Carr: One would like to make a big increase in all these things, and what the hon. Member has said will be borne in mind, but I am sure that he will be the first to agree that we must consider the whole of our aid programme and not simply one portion of it, however important that may be.

Mr. P. Noel-Baker: Is it not of special importance that in 1964 the full target of 100 million dollars for this Special Fund should be attained? Will the right hon. Gentleman bear in mind that if we increase our contribution we secure a further additional contribution from the United States?

Mr. Carr: Certainly, and I am sure that the right hon. Gentleman will be aware that we have already set a fairly good example with a 25 per cent. increase and that we are and always have been the second largest contributor.

Service Overseas (Voluntary Societies)

Mr. Prentice: asked the Secretary for Technical Co-operation what forward planning is taking place in his Department to help the Voluntary Societies' Committee for Service Overseas increase the number of volunteers going to work in developing countries; and if he will make a statement on the scale of the increases anticipated in the next few years.

Mr. Carr: Discussions are at the moment in progress with the voluntary societies and other bodies concerned about plans for 1964–65. I will make a statement as soon as possible about the result of these considerations.

Mr. Prentice: Is the right hon. Gentleman aware that many of us would prefer to see the establishment of some British equivalent of the American Peace Corps to do this job? Failing that, I welcome what the right hon. Gentleman said and ask him to give careful consideration to extending the number of graduate volunteers. I believe that 250 are going this year under the auspices of this Committee. Is his Department thinking in terms of a much larger number in subsequent years?

Mr. Carr: I would not like to forecast the numbers. I hope that when I make a statement it will be an optimistic and expanding one.

Technical Assistance

Mr. Millan: asked the Secretary for Technical Co-operation if be will state the total sums of technical assistance which have now been granted to coun-

tries overseas in respect of projects specifically designed to provide work in development areas in this country.

Mr. Lawson: asked the Secretary for Technical Co-operation whether he will now announce further projects of technical assistance to countries overseas providing work for development districts in Scotland.

Mr. Carr: My Department is mainly concerned with sending experts abroad and bringing students and trainees to this country. There is very little scope in technical assistance programmes for using surplus productive capacity in the United Kingdom. Such use of surplus productive capacity is capital aid and outside the scope of my Department.

Mr. Lawson: Nevertheless, while I appreciate the point, will the right hon. Gentleman bear in mind that this kind of activity is one which kills two birds with one stone, as it helps development areas in this country and helps development areas elsewhere? Will he use all his influence to see that this type of aid is stepped up?

Mr. Carr: I shall certainly bear that in mind, and my right hon. Friend the Chancellor of the Exchequer has already, by action, shown his understanding of that point.

Mr. P. Noel-Baker: Does the right hon. Gentleman recall that sending experts abroad and bringing students here on fellowships has led to large orders for British equipment, and that in fact on all the money which we have given for technical assistance, for the Special Fund, and even for the International Bank, we have made a large margin of profit in foreign exchange?

Mr. Carr: I very much agree with the right hon. Gentleman, and I appreciate what he says about this. Indeed, in the long run there can be no better aid to British trade, for the development areas and elsewhere than to bring as many people here to train and send as many of our people abroad as possible.

Overseas Appointments

Mr. Worsley: asked the Secretary for Technical Co-operation whether,


when overseas appointments are filled, preference is given to those with previous overseas service.

Mr. Carr: Previous overseas experience is regarded as a strong qualification. Of the 1,042 vacancies filled by my Department in 1962, 247 successful candidates had previous overseas experience.

Mr. Worsley: Of the thousand or so jobs that he has filled, can my right hon. Friend say how many demanded the special skills of the former overseas civil servant, and whether before he fills them he consults the Overseas Resettlement Bureau?

Mr. Carr: Dealing with the latter point first, I assure my hon. Friend that the particulars of every vacancy of which we know are sent to the Overseas Resettlement Bureau so that we make sure that people with previous overseas experience can be considered. I cannot give my hon. Friend figures about the number of vacancies which specifically require the skills of those with previous overseas experience in Government service. They obviously are considerable. Nevertheless, it is also true that these developing countries are increasingly wanting new skills, and this is why the old overseas people have to be supplemented with new people.

Mr. Longden: Can my right hon. Friend say what progress is being made with the project of his predecessor, that of transferring people who are becoming redundant in Africa as a result of independence to Latin America?

Mr. Carr: Perhaps I might be allowed to look into that and write to my hon. Friend.

Overseas Aid (White Paper)

Mr. Worsley: asked the Secretary for Technical Co-operation when he intends to publish a further report on the activities of his Department.

Mr. Can: The Government intend to publish a White Paper on Overseas Aid generally before the Summer Recess and this document will, of course, include a section on the work of my Department.

Mr. Worsley: Is my right hon. Friend aware that the House welcomes the news

of a White Paper on this? Will he also realise that, whereas the first report of the Department he now heads was of a somewhat preliminary character, it left open a number of issues, and a number of inquiries to be made, upon which I think the House would welcome more information?

Mr. Carr: I shall certainly bear that in mind.

Sir G. Nicholson: Will the White Paper include the tabulated report of the work referred to in the previous Question, showing what sort of posts are being filled, where they are being filled, by whom, and so on?

Mr. Carr: I shall also bear that point in mind.

Teachers

Mr. John Hall: asked the Secretary for Technical Co-operation what further proposals he has to encourage more teachers from this country to take teaching posts for a few years in those countries which are unable to meet their educational needs from their own resources.

Mr. Carr: In 1962, 270 teachers were recruited and we hope to do better this year. It is still difficult to attract the senior and experienced teachers who are especially in demand. I shall be consulting the National Council for the Supply of Teachers Overseas about further steps to improve recruiting.

Mr. Hall: Is my right hon. Friend aware that there is a demand for thousands of teachers in these countries? Is he further aware that many teachers are reluctant to take short-term teaching posts overseas because of possible adverse effects on their careers in this country? What discussions is my right hon. Friend having with local education authorities and universities to see whether some scheme can be devised to that overseas service helps and does not damage their careers in this country?

Mr. Carr: I have the last point very much in mind, and one piece of work done by the National Council for the Supply of Teachers Overseas has been to draw up what I might call a code of secondment which, among other things, takes my hon. Friend's point into


account. We shall certainly be pursuing this actively with the local authorities. With regard to the supply, I know that there is great need, and although I can do no more than hope, my hope is that last year's figure will be substantially succeeded.

Mr. Paget: How does the right hon. Gentleman fit this in with the difficulty that there is an enormous shortage of teachers here?

Mr. Carr: I think that the House must accept, and does accept, that this important matter of overseas aid demands some considerable self-denial in this country.

Mr. F. Harris: Of the 270 teachers referred to, does my right hon. Friend know how many of these might have gone to East Africa, where they are so vitally needed?

Mr. Carr: There is another Question about East Africa. I am afraid that I cannot give my hon. Friend that figure straight away, but I shall certainly write to him.

Oral Answers to Questions — OVERSEAS INFORMATION SERVICES

Television Films

Mr. John Hall: asked the Secretary of State for Technical Co-operation what progress has been made in the production and use of television films for teaching English overseas.

Mr. Carr: The B.B.C., with help from the British Council, has produced an elementary course of English by Television, in thirty-nine lessons, designed for general audiences. It has sold these lessons to a number of countries. The British Council and the B.B.C. have now agreed on the production of a further series of such lessons and of twelve teacher-training films. In addition, the Centre for Educational Television Overseas is in consultation with the British Council and the B.B.C. about the production of short teaching aid programmes mainly for use on television in underdeveloped countries.

Mr. Hall: While welcoming this evidence of progress in this form of teaching, can my right hon. Friend say in how many countries these films are now

being used and whether they have been welcomed?

Mr. Carr: The first films are mainly in use in European countries, but the later films which we are producing are more specially designed for under-developed countries. I am sorry that I cannot give the exact number of countries offhand, but I can assure my hon. Friend that the films are welcomed and that that is why we are producing more of them.

Sir L. Ropner: Are any steps being taken to obtain copies of the sponsored films made by a large number of industrial and commercial companies, which can often be obtained free of charge and are extremely well done and very informative?

Mr. Carr: I am afraid that I do not know the answer to that, but I will certainly look into the matter, because I appreciate the value of the suggestion.

Oral Answers to Questions — SCIENCE

Migraine

Mrs. Castle: asked the Parliamentary Secretary for Science what basic research into the cause of migraine is being carried out by the Medical Research Council.

The Parliamentary Secretary for Science (Mr. Denzil Freeth): The aspects of the Medical Research Council's programme considered likely to throw light on the causes of migraine include studies on the blood vessels of the brain, hormone disturbances, and disorders of the special senses, particularly those of the eyes and ears.

Mrs. Castle: Is the hon. Member satisfied that the work being done in this direction is extensive enough, in view of the large number of migraine sufferers in this country and the fact that we seem to be up against something of a medical mystery in this field? Is it not a fact that the funds which this country devotes to medical research in general are totally inadequate? Will the hon. Member therefore see that the sums devoted to this aspect of it are increased?

Mr. Freeth: The difficulty about research into the causes of migraine is that it is really a symptom of what may turn out to be a considerable number


of different states. The Medical Research Council is always ready to consider sympathetically applications which are made to it for grants for research into subjects which may have a bearing on migraine. In regard to the second part of the hon. Lady's supplementary question, I do not believe that the Medical Research Council is being kept short of money by the Government.

Mr. Rankin: Does the hon. Member realise that there are 5 million sufferers from this ailment in Great Britain? Will he look a little more closely into the question of research, because it would appear that while research goes on it is not sufficiently organised and consolidated.

Mr. Freeth: As far as the Medical Research Council is concerned, this work is Co-ordinated, and there is a close interchange of information. The difficulty is that research into the causes arid treatment of migraine have so far been very unrewarding, because of the large variation of precipitating factors and responses to treatment from patient to patient. It is not a single disease upon which we can turn the spearhead of attack.

Heavy Water Reactors

Mr. Pentland: asked the Parliamentary Secretary for Science what consultations have been held with the Atomic Energy of Canada Co. Ltd., regarding an exchange of technical information on heavy water reactors with the United Kingdom Atomic Energy Authority; and why such an exchange of information has been refused.

Mr. Denzil Freeth: The hon. Member is misinformed. Atomic Energy of Canada Ltd. has recently made new proposals for the exchange of technical information with the U.K. Atomic Energy Authority on heavy water reactors, and these are under discussion.

Mr. Pentland: I thank the hon. Member for that reply. Would it be right or wrong to claim that the heavy water reactor being developed in Canada may prove to be superior to the advanced gas-cooled reactor being developed in this country? If so, does he not agree that this could have serious consequences for this country and for the Atomic

Energy Authority, having regard to the capital cost involved in the development of the gas-cooled reactor and the subsequent loss of the export market?

Mr. Freeth: The hon. Member's premise is hypothetical, and his deductions even more so.

Mr. Shinwell: What kind of an answer is that?

Mr. Ross: It may be clever, but it is very silly.

Mr. Pentland: If the hon. Member has no explicit information on this question, will he issue a statement relating to the supplementary question that I have raised?

Mr. Freeth: The hon. Member asked me whether the Canadian reactor might not prove to be a better or more economic proposition than the advanced gas-cooled reactor. Until both are tested it is possible that one or the other will be the more satisfactory.

Plutonium

Mr. Pentland: asked the Parliamentary Secretary for Science what method of inspection has been requested by Her Majesty's Government in order to ensure that the plutonium supplied to France is used for civil purposes and not for military purposes.

Mr. Denzil Freeth: This plutonium is being supplied under the Co-operation Agreement of 1959 between the United Kingdom and the European Atomic Energy Community which contains guarantees that the material will be used solely for peaceful purposes. Inspections under the Agreement will be carried out by the Euratom Commission.

Mr. Pentland: Are the hon. Member and the Government satisfied that the 1959 Agreement ensures that plutonium from this country will not be used for military purposes? In view of the declared policy of France to have an independent nuclear strike force of her own, does the hon. Member agree that a method of inspection should be embodied in any agreement we have with Euratom involving the supply of plutonium to France or any other country of the Six?

Mr. Freeth: I agree that it is absolutely essential that there should be adequate powers of inspection, and adequate use of them. Article 81 of the Euratom Treaty empowers inspectors of the Euratom Security Control to have all necessary access at all times for the purpose of their duties, and under our agreement with Euratom it is open to Her Majesty's Government, by consultation and visit, to assure themselves that these safeguards and the control system are working properly.

Mr. Crossman: What we are asking is not whether we have power to investigate but whether investigation has in fact taken place. Can the hon. Member tell us whether these powers are being used by us?

Mr. Freeth: This is the first contract for a supply of plutonium to anybody other than the United States. As the hon. Member may know, the contract was signed in Paris yesterday, and it is therefore a little early to start inspecting where it is being used. But we have great confidence in the Euratom Security Control. Yesterday I was at the United Kingdom Euratom Continuing Committee when the subject was discussed.

Postal Computing Service

Dr. Bray: asked the Parliamentary Secretary for Science what would be the cost to the Department of Scientific and Industrial Research of providing a postal computing service so that every O-level candidate in mathematics could be given practice in the elements of computer programming.

Mr. Denzil Freeth: Such a service could not be provided by the Department of Scientific and Industrial Research within its present statutory responsibilities.

Dr. Bray: Is the hon. Member aware that his Department is the only one in the Government that is likely to appreciate the need for such a service, and that it would do a great deal to enliven interest in the teaching of mathematics? Will he consider offering the Minister of Education the use of such a service?

Mr. Freeth: The hon. Member is wrong in not ascribing to my right hon. Friend the Minister of Education an interest in matters scientific and an

interest in the teaching of mathematics equal to that which my noble Friend and I possess.

Cryogenics and Superconductivity

Mr. Dalyell: asked the Parliamentary Secretary for Science what research is being done into cryogenics and superconductivity.

Mr. Denzil Freeth: Of the research establishments for which my noble Friend is responsible, the Atomic Energy Research Establishment at Harwell is carrying out work on the superconductivity of thin metallic films and on the relationship of metallic structure to superconductivity, while work on the mixing of helium III and helium IV has led to a new method of cooling to low temperatures. The Department of Scientific and Industrial Research is undertaking work on the influence of metallurgical factors and other physical variables on superconductivity and on the development of a cryotron at the National Physical Laboratory. It is also supporting work in universities.

Mr. Dalyell: In the United States this sort of development goes side by side with the missile programme. Is the hon. Member quite certain that the results of this research are being transferred to British industries?

Mr. Freeth: I think that is the position. I should naturally be glad to receive any criticisms of which the hon. Member may have heard. There is a panel which exists to Co-ordinate and stimulate research into this subject, and very little of it in this country comes under any kind of security blanket.

Sir T. Moore: I am sorry to confess my ignorance, but will my hon. Friend tell me what is the meaning of cryogenics?

Mr. Freeth: Very roughly, it is doing things at extremely low temperatures.

Marine Life

Mr. Dalyell: asked the Parliamentary Secretary for Science what long-term studies are being conducted of the way in which minerals are extracted and concentrated by marine life; and what communications he has had with industry on this subject.

Mr. Denzil Freeth: Research has been carried out for many years at marine laboratories in the United Kingdom, and particularly at the Plymouth Laboratory of the Marine Biological Association, on the concentration by marine animals and plants of the chemical constituents of sea water, including at the present time caesium, potassium, sodium, zinc and manganese, and in recent years strontium, iodine, niobium and vanadium. I have had no communications with industry on this subject.

Mr. Dalyell: Does not the hon. Member agree that the vanadium aspect is extremely important industrially? What can he do to bring this to the notice of industry?

Mr. Freeth: At present most of the research is of a very basic nature, but if industry believes that there is a commercial proposition here, I have no doubt that it will have noted the hon. Member's Question and my Answer.

Mr. Driberg: Can the hon. Member say whether this research covers the effect upon oysters of hot, chlorinated and slightly radioactive effluent from nuclear power stations?

Mr. Freeth: Perhaps the hon. Member would be good enough to put down a Question on that point. My interest in oysters would preclude me from giving an answer off the cuff.

Agriculture (Chemicals)

Mrs. Butler: asked the Parliamentary Secretary for Science what research his Department undertakes into the possible effects on animal and human health of all new chemical products used in agriculture and horticulture.

Mr. Denzil Freeth: Research in this field is currently being undertaken by all the four research councils, which are responsible to my noble Friend, and also by the British Industrial Biological Research Association, which is grant aided by the Department of Scientific and industrial Research. This research, as well as any applied research for which my right hon. Friend the Minister of Agriculture, Fisheries and Food is responsible, is kept under review by a Committee set up by the Agricultural Research Council under the Chairman-

ship of Professor Frazer of Birmingham University.

Mrs. Butler: In the light of the new evidence now available about what appears to be a chain reaction between many of these chemicals and a consequent damage to human and animal health, does not the hon. Gentleman think it necessary to have a completely fresh approach to the whole problem and a much more rigorous examination of pesticides and chemicals before they are released on the market? If this is being done in America, is there any reason why we cannot do it here?

Mr. Freeth: There are really two questions here. First, the research aspect. I am satisfied that the Frazer Committee is well equipped to survey and report on the state of research in this respect and to make recommendations. Regarding the commercial exploitation of chemicals, there is, of course, the voluntary notification scheme operated by my right hon. Friend the Minister of Agriculture, Fisheries and Food, and I think that Questions on that subject should be addressed to him.

Mr. J. Wells: Would my hon. Friend give an undertaking not to "double-up" unnecessarily on the semi-commercial research being undertaken in the United States and to give adequate publicity to the successful outcome of new chemical and agricultural methods, because it is only through steps forward in chemical methods that we shall be enabled to produce enough food for the country?

Mr. Freeth: I agree with my hon. Friend. It is vital that the agricultural and horticultural producer should have every help that science can give him. But it is also important that we should parallel with it adequate research on the short-term and the long-term effects of all kinds of chemicals.

Mr. Crossman: In view of the degree of uncertainty about the effect of these products on animal life, will the hon. Gentleman give an assurance that top priority is being given to this matter by the Government and by his Department? Is he aware that we are concerned that this should not be allowed to run on but that it should be treated as something of first-class importance, as it deserves to be?

Mr. Freeth: I think it is receiving that treatment. Certainly research has been intensified since the publication of the Sanders Report.

Lung Cancer

Mr. Darling: asked the Parliamentary Secretary for Science whether research into the causal relationship of cigarette smoking and lung cancer, undertaken by the Medical Research Council and other scientific institutions that have reported their findings to him, has fully covered the effects of inhaling smoke from tobacco that has been subjected to toxic sprays or grown in soil in which the residue of such sprays is still active.

Mr. Denzil Freeth: Research workers of the Medical Research Council and others who have undertaken research on the relationship between smoking and lung cancer have taken the possible effects of toxic sprays into account and have found no evidence that these sprays are a causative factor in the production of lung cancer among cigarette smokers.

Mr. Darling: In view of the fact that we have had answers which are rather complacent—not from the hon. Gentleman but from the research people—with regard to pesticides and insecticides, is the hon. Gentleman absolutely certain that enough research has been done to enable such a categorical assurance to be given?

Mr. Freeth: When the hon. Gentleman sees my original answer I think he will see that I said that no evidence had been found. I did not mean by that to express absolute certainty that no evidence would be found. Frankly, it is impossible to claim absolute certainty while the mechanism of causation of lung cancer remains uncertain. But research is going on at the Medical Research Council and a certain amount of research is financed by industry.

Research Associations (Management-Staff Relations)

Mrs. Hart: asked the Parliamentary Secretary for Science if he will make it a condition of grant aid to research associations that they shall satisfy him

that machinery for ensuring good management-staff relations exists.

Mr. Denzil Freeth: No, Sir.

Mrs. Hart: Can the hon. Gentleman give a good reason for that answer? Is not it entirely reasonable that where we are spending a considerable amount of public money we should satisfy ourselves that the minimal management-staff relationships exist, that appeals against dismissal are guaranteed and that in the research association to which we contribute tribunals do not give damning indictments of relationships which exist at the present time?

Mr. Freeth: With regard to the wider point, the management of research associations are responsible to their councils and directors. It is a condition of receiving grants that they should be capable of carrying out research programmes effectively, which would not be possible if management-staff relations were poor. With regard to the case about which the hon. Lady and I have corresponded, one has to remember that the principal criterion which may be adopted by a National Insurance tribunal may not always be exactly the same as the criterion which may be adopted by an individual employer and employee.

Dr. Bray: Is the hon. Gentleman aware that this is a more widespread difficulty than his reply would seem to suggest? Will he look into the relationships of the staff and the technical direction of research in some of the larger research associations?

Mr. Freeth: If the hon. Gentleman has any particular research association in mind, naturally I will take up the matter.

Mrs. Hart: Has not the Parliamentary Secretary in correspondence with me already replied that he is not prepared to look at individual cases because administration is entirely a matter for the management?

Mr. Freeth: That is true. But I am capable of passing on a letter from an hon. Member, which naturally would receive careful attention, to the directors of research associations.

Research Associations and Public Corporations

Mr. Bence: asked the Parliamentary Secretary for Science what steps he is taking to encourage scientific research and development by research associations and public corporations.

Mr. Denzil Freeth: My noble Friend is responsible for the Department of Scientific and Industrial Research and the Atomic Energy Authority, which support and carry out research and development. D.S.I.R. supports research associations by providing revenue grants in support of their general activities. These amounted to over £2 million in 1962–63. In addition, special grants are made for building projects and for the extension of information services, and earmarked grants for special research projects. The Atomic Energy Authority, of course, carried out a large civil research and development programme. I understand that my right hon. Friends discuss research programmes on appropriate occasions with the nationalised industries and statutory bodies with which they are concerned.

Mr. Bence: Will the hon. Gentleman make sure that more money is contributed to research associations by the large manufacturing institutions? Is he aware that there is a feeling—it seems to come out in the Report—that they are not making the contribution which ought to be made? Is he aware that many small manufacturers in this country are entirely dependent on research by public corporations and associations and that it is to help them that the research association should do more than is done at the present time?

Mr. Freeth: The only way in which my noble Friend could constrain industry to contribute to research is through the use of the provisions of Section 9 of the 1947 Act. It is our constant effort to encourage industry to contribute more fully and generously to research associations, and it is by no means always the large firms in this country which are niggardly.

Mr. Hector Hughes: In taking steps to encourage contributions to research, as envisaged by the Question and the Minister's Answer, may I ask the hon. Gentleman to say what his Ministry is

doing, compared with research in other countries, to ensure British supremacy in this field and what steps he is taking to apply the results of that research in a practical way to British industry and to the British way of life?

Mr. Freeth: We follow carefully the arrangements in other countries with regard to research associations for cooperative research. My information is that the British Government are more generous than any other Western Government in giving general grants to such bodies.

Biological Research

Mr. Bence: asked the Parliamentary Secretary for Science what further consideration he has now given to the report of the ad hoc Committee on Biological Research, published as Appendix B in the Annual Report of the Advisory Council on Scientific Policy, 1961–62.

Mr. Denzil Freeth: As I informed the hon. Member in reply to his Question of 19th March, substantial increases are envisaged in the expenditure of the Agricultural and Medical Research Councils and of the Nature Conservancy and of the Department of Scientific and Industrial Research on grants for biological research during the coming year. The Advisory Council made clear in its Report that many of the matters touched on by the Royal Society Committee call for action within the universities. Matters of organisation will be further considered in the light of the findings of the Committee on the Organisation of Civil Science.

Mr. Bence: Can the hon. Gentleman give us an assurance that it is not shortage of money from the Treasury or the University Grants Committee which leads to the phenomenon of an enlarged biological section of the university and yet a static situation in biological research?

Mr. Freeth: I do not think that there is a static situation. The bodies for which my noble Friend is responsible have substantially increased expenditure on biology.

Mr. Crossman: The hon. Gentleman may say that it is not a static situation. But he knows full well that in the Report —[HON. MEMBERS: "Question."] Is


the hon. Gentleman aware that in the Report the amount stated to be the minimal requirement is double the amount of money for biological research? Is it the intention of the Government to double the amount of money and increase the number of posts and to carry out not merely the money requirements but all the other requirements referred to in the Report, which was a devastating exposure of the inadequacy of biological research in this country?

Mr. Freeth: As I told the House, expenditure by the bodies for which my noble Friend is responsible has been increasing. The hon. Gentleman will be aware of the increased grants being made to universities which were announced only last week. Regarding the second part of the hon. Gentleman's Question, this is an independent Report by scientists who are responsible to themselves, and it is not incumbent on the Government to support their recommendations in every particular.

Research Establishment, Aldermaston (Scientists)

Sir A. Hurd: asked the Parliamentary Secretary for Science how many of the scientists now working at the Atomic Energy Research Establishment at Aldermaston are likely to have to transfer to other work; and what steps he is taking to ensure that they and the engineers and surveyors who move to other Government service do not lose seniority in pay and pension rights.

Mr. Denzil Freeth: As regards the first part of the Question, I have nothing to add to my statement on 19th March. The matters referred to in the last part of the Question are at present under consideration.

Sir A. Hurd: May we take it that most of the scientists are being retained at Aldermaston and that there should not be any great problem of redundancy, or has the position changed? As regards the engineers and surveyors, has progress been made in attracting to Aldermaston work from other Government Departments to keep them together as a team, and a very valuable team?

Mr. Freeth: In answer to the first part of that question, not only is there at present not a surplus of scientists at

Aldermaston, but there is none of any consequence in the rest of the Authority. Wastage rates of scientists are high, but there would have to be a substantial run-down at Aldermaston before any serious problem was likely to arise on that front. In regard to the engineering group, the major part is at Risley. It is only a subsidiary part which is stationed near Aldermaston, and I am afraid that I cannot make any statement on that today.

Wet Grain Storage

Mr. Ridley: asked the Parliamentary Secretary for Science when the Agricultural Research Council will complete its research into the storage of wet grain.

Mr. Denzil Freeth: I am informed by the Agricultural Research Council that the Rowett Research Institute is investigating the feeding value of barley that has been stored in damp condition. The results from the first trials are expected to be available towards the end of this year. Further trials will not be completed before some time in 1964.

Mr. Ridley: Is it not true that the Agricultural Research Council has been working on this problem for nearly three years now and many farmers are already storing wet grain? Surely my hon. Friend can tell us when he expects research to catch up with practice in this matter?

Mr. Freeth: The Agricultural Research Council has been working on this problem from 1952. At the present moment we have investigations on a laboratory scale at the Rowett Research Institute and also on a wider scale on experimental farms run by the Ministry of Agriculture, Fisheries and Food. When we have the results of those investigations to hand, I think we shall be in a better position to make an announcement.

Atomic Explosions

Mr. Wainwright: asked the Parliamentary Secretary for Science if he will set up a team of scientists to investigate the possibilities of harnessing the energy generated by an atomic explosion far below the surface of the earth.

Mr. Denzil Freeth: No, Sir. The Atomic Energy Authority is in touch with


work which is being done in the United States of America and Euratom. If it appears likely that this work would be a practicable and economic source of energy, it would be in a position to develop it.

Mr. Wainwright: Is the hon. Gentleman quite satisfied that we should be able to take full advantage of any experiment taking place in Euratom or the United States of America? Is it not possible that because we are not ourselves attracting scientists to investigate these possibilities, if there is a break-through in these sources of power we might be left behind other countries?

Mr. Freeth: So far this has proved a very expensive matter. I think the hon. Member realises that nuclear energy covers so wide a field that it is impossible to put a reasonable effort into every single aspect. I am assured that if this method appeared to be a practical and economical source of energy, the Authority would be in a position to develop it.

Natural Resources in Scotland (Report)

Mr. Willis: asked the Parliamentary Secretary for Science what consideration he has given to those recommendations of the Elgood Committee on Natural Resources in Scotland which affect his Department.

Mr. Denzil Freeth: These recommendations have been taken into account by the Committee on Research into Natural Resources—the Slater Committee —of the Advisory Council on Scientific Policy.

Mr. Willis: Can the hon. Gentleman say when anything is likely to be done about them, because this Report was published some time ago?

Mr. Freeth: The Elgood Committee reported to the Scottish Council. Therefore, a very large part of its recommendations is the responsibility of the Secretary of State for Scotland. The Slater Report is at present under consideration by the Advisory Council which set up that Committee.

N.A.T.O. (GERMANY)

Mr. Zilliacus: asked the Prime Minister whether he will give instructions to representatives of Her Majesty's Government at the North Atlantic Treaty Organisation Conference in Ottawa to oppose proposals for West German participation, direct or indirect, in the proposed multilateral nuclear force in the North Atlantic Treaty Organisation or in the proposed multilateral mixed crew surface fleet armed with Polaris missiles.

The Prime Minister (Mr. Harold Macmillan): I would refer the hon. Member to the reply I gave to the hon. Member for Ashfield (Mr. Warbey) on 14th May.

Mr. Zilliacus: As the Prime Minister's reply on that occasion was simply "No, Sir", may I ask if he does not recognise that to allow Germany any share in the control or possession of nuclear weapons is well-nigh bound to increase suspicion, fear and tension in Europe and make it much more difficult to reach a settlement?

The Prime Minister: So far as I know, there is no proposal to give Germany control of or possession of nuclear weapons.

Sir C. Osborne: Would not my right hon. Friend agree that Western Germany is far safer as regards the Soviet and Western Europe if she is a member of N.A.T.O. than if she is driven on her own to rearm from her own resources?

The Prime Minister: Yes, Sir. It has been the whole policy of successive Governments that Germany should be a part of the international Atlantic Alliance.

PRESIDENT KENNEDY AND PRIME MINISTER (MEETINGS)

Mr. Shinwell: asked the Prime Minister what recent communication he has addresed to President Kennedy about a meeting; what was the nature of the reply; and when a meeting between himself and the President will take place.

Mr. Emrys Hughes: asked the Prime Minister what were the circumstances in which he invited President


Kennedy to meet him in Northern Ireland; and what reasons the President gave for declining the invitation.

Mr. Zilliacus: asked the Prime Minister whether he has now reached agreement with President Kennedy on a meeting between them; and whether he will make a statement.

Mr. Warbey: asked the Prime Minister what progress he has made with his efforts to arrange a meeting between President Kennedy and himself during the course of the former's tour of Western Europe and Eire.

The Prime Minister: Since President Kennedy has been in office we have had six meetings. Three of these have been on British soil and three have been in the United States. We have thus met about two or three times a year. This pattern has followed that set during General Eisenhower's Presidency. We have found this arrangement convenient and have been able to fix up meetings at very short notice when we felt it convenient. No arrangements have been made for another meeting, but I have no doubt that we shall continue what I think has been a good practice.

Mr. Shinwell: Has not the right hon. Gentleman made a recent approach to President Kennedy for a meeting in view of his intention to visit the Republic of Ireland? If his communications are not strictly confidential, is it not possible to inform the country of what is happening? Is the right hon. Gentleman in his approach to a meeting with President Kennedy cooking up something in preparation for the next General Election?

The Prime Minister: No, Sir. I think there is some confusion. At the request of the Prime Minister of Northern Ireland, since we are responsible for the foreign relations of Northern Ireland, I transmitted an invitation from the Prime Minister to a ceremony at the Giant's Causeway, but the President regretted that he could not fit that into his programme.

Mr. Shinwell: What is the purpose of the meeting to take place at the Giant's Causeway? Was the contemplated conversation of such secrecy that it was necessary to engage the Giant's Causeway for this purpose?

The Prime Minister: This was not a meeting I would attend, but an invitation from the Government of Northern Ireland who thought it might interest the President when he was in the Republic of Ireland to attend what I understand is to be a ceremony of some importance, and indeed of an historic character, but he said in his reply that he much regretted he was not able to do so.

Mr. Emrys Hughes: Can the Prime Minister say whether he is just acting as a postman for the Prime Minister of Northern Ireland? Does he not realise that President Kennedy is going to Ireland so that he may have a couple of days' rest in a decent, intelligent, civilised country which has no missiles and no independent deterrent? Does he think that President Kennedy would want to go to Ulster to take part in an Orange Walk?

The Prime Minister: I think the President will have a nice time of rest, although when I saw something of the preliminary programme I thought it would be very difficult to get a full rest. I think it very proper, since the Government of Northern Ireland rely upon us for foreign relations, that I should transmit this request, which I did.

Mr. Zilliaeus: Has not the attention of the Prime Minister been drawn to reports from Washington in our newspapers—for instance, the Guardian of 24th April and The Times of 13th May —to the effect that the President's unwillingness to hold a conference of this kind at this moment is due to the suspicion in administrative circles that this is not unconnected with the approach of a General Election? What steps will the Prime Minister take to remove these unfortunate impressions in administrative circles due to a chronological coincidence which occurred also in 1954 and 1959?

The Prime Minister: I have seen various reports and I have seen the contradiction issued by the State Department of various statements which have been made. All I can say is that a lot of very silly things are said. In this case not only was the premise false but the inference was false.

Mr. Warbey: Is not the Prime Minister very anxious to meet President Kennedy


in the near future? Is it not very important that he should be able to tell President Kennedy at this moment that this country is unalterably opposed to any proposals which would involve West Germany in having any share, direct or indirect, in the use of nuclear weapons?

The Prime Minister: In the course of these meetings, which take place every four or five months, we have an opportunity of discussing this question with the President, and also of putting forward what I suppose is the view of the Labour Party on this matter.

SECURITY

Lieut.-Colonel Cordeaux: asked the Prime Minister if he will make a statement on the incidents in which unauthorised persons recently forced their way inside a Government building used by certain branches of the Security Service and took photographs of people working there.

The Prime Minister: I would refer my hon. and gallant Friend to the replies which I gave to Questions on this subject on 16th May.

Lieut.-Colonel Cordeaux: While not being aware of any definite reply made by my right hon. Friend on this point, as opposed to the question of interfering with telephone lines, may I nevertheless ask him whether any arrests were made of people interfering with telephone communications or forcing their way into any of these establishments, and whether any proceedings are pending against them?

The Prime Minister: As far as my information goes, there was only one incident, and there was no question of a forcible entry. As I told the House last Thursday, a caller who said he was a reporter declined to give his name, entered the hall of the building and was then refused entry. He subsequently took a photograph of the outside. There is no offence in that and no question of prosecution therefore arises.

Mr. G. Brown: As reference has been made to the supplementary question about telephone calls, may I ask the Prime Minister whether the numbers have now been changed and in what form they will be made public?

The Prime Minister: Really, the right hon. Gentleman must not let failure go to his head.

Mr. Grimond: Is the Prime Minister answering Questions Nos. 3 and 4 together?

Mr. Speaker: No. 3 was not called. The Prime Minister answered No. 4.

Mr. Grimond: Is it not a fact that photographs were taken of people going into this building and also of people inside it? Can the Prime Minister tell the House whether any photographs were taken of people going into or leaving this building? If there were any such photographs, is not this a much more serious matter than the House has so far been led to believe?

The Prime Minister: I could not answer Question No. 3, because it was withdrawn. My information is that a photograph was taken from the outside. It is difficult to make that into a crime, although I am bound to say that I can see the point made by the right hon. Gentleman. If somebody tries to hang about and to make it a habit, whether by photograph or other means, to check on all callers, that might be different, but I do not think that we can bring a prosecution against someone who just stands and takes photographs.

UNITED NATIONS (SOUTH AFRICA)

Mrs. Castle: asked the Prime Minister whether, in view of the request to the President of the Security Council by the chairman of the United Nations Special Committee on the Policies of Apartheid in South Africa that the report of the committee should be discussed by the Security Council as soon as possible, he will consult President Kennedy with a view to this matter being raised jointly by the delegates of the United Kingdom and the United States at the special meeting of the Security Council now in session.

The Prime Minister: No, Sir; there is no special meeting of the Security Council now in session. The Council is empowered to meet at any time and will no doubt consider the interim report of the Special Committee as soon as members think this appropriate.

Mrs. Castle: Is the Prime Minister aware that the United Nations Special Committee pointed out that South Africa is now building up a military establishment far beyond its defence needs and has expressed grave anxiety and indignation at the continued provision of arms to South Africa by other Powers? Is he also aware that Chief Luthuli issued an appeal to the whole civilised world to stop supplying arms to South Africa, and that the International Commission of Jurists has described South Africa as copying some of the worst features of the Communist-Stalinist régime? In view of this, will he instruct the United Kingdom delegates, either at the Security Council or at the General Assembly, to raise this matter as one of urgency?

The Prime Minister: I think that the hon. Lady is under some misapprehension. The Security Council is not in session. It can, of course, meet if the president of the month calls it or if anybody applies for it. This report will come before the next meeting of the General Assembly and will, no doubt, be debated.

Mr. P. Noel-Baker: In the meantime, will the Prime Minister give his attention to the immensely important statement made by Chief Luthuli and reported in The Times this morning?

The Prime Minister: Yes, Sir. We will take that into consideration with all other relevant considerations.

Mr. Biggs-Davison: Should not the United Nations and all of us work for peaceful co-existence between the various African States irrespective of the colour of their Governments?

The Prime Minister: I think that the views of Her Majesty's Government and, indeed, of the whole country on the question of apartheid are known. The only question is, what are the best methods which in the long run will bring happiness and peace to these territories?

INDUSTRIAL ESTATES (SITING)

Miss Herbison: asked the Prime Minister if he is satisfied that the existing machinery, by which Her Majesty's Government ensures that areas having high unemployment following the decline in the older industries are given

priority in the siting of industrial estates, is adequate; and if he will make a statement.

The Prime Minister: Yes, Sir.
Decisions about the siting of new Government industrial estates are taken by the Board of Trade who naturally consult the other Departments concerned. In Scotland these include the Scottish Office, the Ministry of Labour and the Board of Trade's Office in Scotland, as well as the Industrial Estates Management Corporation for Scotland. In deciding on the location of an industrial estate the Board of Trade have to take account not only of the level of unemployment but also the existence of good communications, the availability of suitable building land and the attractiveness of the area to expanding industry.

Miss Herbison: Is the Prime Minister aware that there are large areas in Lanarkshire which have suffered very greatly indeed from the closure of pits and foundries and that no alternative industry whatever has been brought to that area? Is he also aware that in some parts there is very great difficulty in getting to any other project which the Board of Trade has brought there? Will he use his influence to ensure that those areas are not neglected and that industrial estates will be built in them?

The Prime Minister: Two advance factories are now building in the hon. Lady's constituency, and there are other Board of Trade industrial estates within reasonable travelling distance. We now intend to set up a new Government industrial estate in North Lanarkshire. The question is to get the best site to meet all the purposes which I described.

Mr. Manuel: Does the Prime Minister recognise that there is a great deal of despondency and disappointment where there is siting and a definite promise but no employment or factories result from the siting? Will he do something to encourage Ministers to pay more attention to this aspect?

The Prime Minister: Two advance factories are now building in that constituency. That is not a promise, but the carrying out of a promise. The question of the next industrial estate is


one on which I think ail hon. Members feel that it is very important to get the right siting from all the different points of view—not only unemployment, but facilities and the likelihood of it being attractive and making a success of it.

NUCLEAR TESTS (EFFECTS ON WEATHER)

Mr. D. Jones: asked the Prime Minister whether, in the light of the facts contained in the evidence sent to him by the honourable Member for Burnley, he will initiate a study of the effect of nuclear bomb testing upon the weather.

The Prime Minister: I am grateful to the hon. Member for sending me a report of remarks attributed to Mr. Manalo of the Philippines, but I do not think they contain evidence that nuclear tests have had any significant effect upon the weather. I am advised that it would not be profitable to initiate a special study of this matter at the present time.

Mr. Jones: In thanking the Prime Minister for the courtesy of that reply, may I appeal to him to consider the matter, in view of the fact that these remarks attributed to Mr. Manalo have gone undisputed and that we might benefit in this country from a similar study to that effected under Command Paper 2029 and a report given to the House?

The Prime Minister: All sorts of remarks are made, and the fact that they are not disputed is not necessarily a reason to set in motion quite expensive and complicated studies. From the advice which I have, I feel that this is not a project on which we ought now to embark. I only have reports of what was said, but he said that if there were 2,000 atomic bombs exploded in the next ten years it would be the beginning of the ice age. We had very bad weather last winter, but I do not think that it was due to any explosions of atomic bombs. I have some information which the hon. Member may like to have: at any one time in the tropics there are said to be between 1,000 and 2,000 thunderstorms going on, each releasing the same energy as a megaton bomb.

Mr. Jones: I must again say that I appreciate the remarks made by the Prime

Minister, but I ask him to remember that the remarks, a copy of which I sent to him, are from a scientist; and with due respect to the Prime Minister, he does not earn that coveted title.

CENTRAL AFRICA

The First Secretary of State (Mr. R. A. Butler): With permission, Mr. Speaker, I will make a statement.
I have for some weeks past been in touch with the Governments in Central Africa about the immediate steps to be taken to secure consideration of the orderly dissolution of the Federation and of the consequential problems involved. I would like to inform the House that I am communicating with the Federal Government, the Government of Southern Rhodesia and the Government of Northern Rhodesia about arrangements for a conference to start at the Victoria Falls, or Livingstone, on a date to be agreed in the second half of June.
The House will be aware that over the same period correspondence has continued with the Southern Rhodesia Government on the subject of the future independence of Southern Rhodesia. The point has now been reached when it appears desirable that these discussions should be continued through personal contact between the two Governments. I have accordingly invited the Prime Minister of Southern Rhodesia, with his advisers, to come to London for discussions which will begin on 27th May.

Mr. G. Brown: May I say how pleased we are that an attempt has been made to get this conference together? Can we assume that the other people who have been invited will, in fact, attend the conference? Can we also assume that the First Secretary is not himself, before the conference begins, committed on the matter of independence for Southern Rhodesia?

Mr. Butler: I am grateful for the right hon. Gentleman's acknowledgment of the fact that we are trying to get these Governments together. I cannot give a final answer on behalf of these Governments.
There is no question of Her Majesty's Government being committed prior to the talks.

Mr. Grimond: I wish to ask the First Secretary two questions. First, does the timing of these two conferences imply that it is hoped to decide the future of Southern Rhodesia before the future of the Federation is discussed? Secondly, does the use of the phrase "the future independence of Southern Rhodesia" imply that Her Majesty's Government are at least committed to taking no further responsibility themselves for Southern Rhodesia?

Mr. Butler: I cannot say whether it will be possible to make sufficient progress in the 1.alks with Southern Rhodesia in relation to our talks which are starting on 27th May. We must leave those to be conducted without prejudice and without prior commitment.
We have at present practically no power of intervention in the internal affairs of Southern Rhodesia. That has been the case now for many years past and it is particularly remarked in the 1961 Constitution. That remains the present position.

Mr. Goodhew: Is the First Secretary not aware that Southern Rhodesia would have been independent long ago had she not been asked to form part of the Federation by the British Government? Does my right hon. Friend not think that it would be only right to acknowledge her right to independence once the Federation ceases to exist by the secession of one of the territories, as he has already granted the right of secession to the other two territories as a condition for their appearing at a future conference to talk about the association of the three territories?

Mr. Butler: For forty years or so this has been what is called a self-governing Colony.
In regard to the second part of my hon. Friend's question, I have nothing to add to what I said earlier. We shall have the talks without prejudice with the Southern Rhodesia Government about their future. I hope that we shall have successful conversations.

Mr. M. Foot: In view of these arrangements, can the First Secretary say whether any arrangements have been made at time same time——or roughly at the same time—to discuss these problems with those who represent the majority of the people in Southern Rhodesia?

Mr. Butler: This particular discussion is simply between Governments.

Sir H. Legge-Bourke: Can my right hon. Friend say whether he regards the whole question of the independence of Southern Rhodesia as a matter purely as between the Government of Southern Rhodesia and Her Majesty's Government, or whether he considers it a matter which ought to be considered by the whole Commonwealth and, if the latter, have the Commonwealth indicated what they think about the matter?

Mr. Butler: The negotiations must take place between the two Governments —Her Majesty's Government and that of Southern Rhodesia—but it would be idle not to say that there is a great deal of interest in the Commonwealth, who are watching this matter very closely.

Mr. Mason: Apart from the question of the independence of Southern Rhodesia, which seems to have receded somewhat in view of the change of Government which has taken place there recently, could the right hon. Gentleman say how high on the agenda is the desire by all races that there should be a continuing economic alliance of the three territories in Central Africa?

Mr. Butler: There is a very strong feeling, which was confirmed to me in conversations with Mr. Kaunda when he passed through London recently, and which has been confirmed to me by the Southern Rhodesia Government and by the Federal Government, that there should be, as a successor to the Federation, as close an economic link as possible, at any rate between the two Rhodesias. I am also in touch with Nyasaland and I am ready to bring her in in the proper way, whether by way of an observer or some other way, into the conversations.

Mr. Biggs-Davison: Is it not unrealistic to suppose that Her Majesty's Government in the United Kingdom will be able to refuse the right of independence to the Government and Parliament of Southern Rhodesia? Had we not better face the facts in this unhappy situation?

Mr. Butler: The fact that we are facing the facts is demonstrated by our invitation to the Prime Minister and his advisers to come and discuss the matter with us.

BUSINESS OF THE HOUSE

Sir G. Nicholson: On a point of order, Mr. Speaker. May I ask my right hon. Friend the Leader of the House a question about the business for today?

Mr. Speaker: I do not know what this is all about, but this would seem a somewhat inopportune moment to do that. I am unaware of any principle on which I could accede to the request of the hon. Member.

Sir G. Nicholson: The second Order of the Day is a Statutory Instrument and has not been considered by the Select Committee on Statutory Instruments.

Mr. Speaker: If and when we get to it—and I say "if and when"—then no doubt the hon. Member can raise that matter, by which time the Committee may have done what is has to do.

WELSH AFFAIRS

Matter of Transport in Wales and Monmouthshire, being a matter relating exclusively to Wales and Monmouth shire, referred to the Welsh Grand Committee for their consideration.—[Sir K. Joseph.]

Orders of the Day — FINANCE BILL

Considered in Committee [Progress 16th May].

[Sir WILLIAM ANSTRUTHER-GRAY in the Chair]

Clause 33.—(INCREASE OF INVESTMENI ALLOWANCES.)

3.38 p.m.

Mr. William Warbey: I beg to move, in page 28, line 31, at the beginning to insert:
(1) In cases to which this section applies.

The Chairman (Sir William AnstrutherGray): I think that it would be convenient for the Committee to discuss, at the same time, the next Amendment in the name of the hon. Member for Ash field (Mr. Warbey) in line 40, at end add:
(2) This section applies, and applies only, to cases of expenditure incurred in an industry prescribed as of national importance or on machinery or plant prescribed as of special national importance; and for the purposes of this section an industry or a description of machinery or plant shall be prescribed as of special importance, if, and only if, the produce of that industry or the use of machinery or plant of that description is of special value in increasing exports, saving imports, promoting technical development or the better use of national resources.
(3) In the last foregoing subsection "pre. scribed" means prescribed by orders of the Hoard of Trade made in the form of statutory instruments and with the concurrence of the Treasury, which shall be laid before Parliament and be subject to annulment by a resolution of the Commons House of Parliament.

Mr. Warbey: We are now coming to a completely new chapter of the Finance Bill, that which deals with capital allowances. It is, therefore, a chapter which is concerned with the use of fiscal weapons as an instrument in economic planning. The Tory Party and the Chancellor have made an extremely belated conversion to the principle of economic planning, but they seek to do it in their own ways—ways which involve as little, interference as possible with private industry.
The whole argument between the two sides of the Committee and in the country now turns, not on whether fiscal


means should be used as an instrument of planning, but on the way in which they should be used, and whether they should be used in a non-discriminatory or a discriminatory form. The essential purpose of the Amendment is to make the proposals in this Clause discriminatory, instead of being an indiscriminate tax hand-out to industry regardless of the purposes to which the new investment is put.
The Conservative Party has moved somewhat in the last eleven years and the Chancellor has urged it on a bit further since he has been in office. The proposals in this part of the Bill are proposals that he brought before the House last November in a kind of little pre-Budget speech, and in what he later described as a form of retrospective legislation. On that occasion, he approved retrospective legislation because he said that it had advantages. Because it had advantages, he was able to abandon the principle of all previous Chancellors in not engaging in retrospective legislation.
In his Budget statement, the Chancellor announced his intention to incorporate his proposals in this Bill in their present form. He was at pains to make clear their main motive and effect. In so doing, he revealed very clearly that the proposals in their present form are not so much a financial weapon as a bribe to all and sundry to enable them to make higher profits at the expense of the taxpayer, in the hope that such an inducement will encourage them to engage in investment.
What kind of investment is, apparently, of no importance? The Chancellor, being a good, if belated, Keynesian, takes the view that all investment is good investment, whether it be in manufacturing weapons of war for sale to a Fascist dictatorship, or in constructing and equipping palatial hotels and office blocks, or in simply digging holes in the ground, as the late Lord Keynes himself said—all that is a good thing in a period of depression or stagnation. Whatever type of investment it may be, however futile or wasteful its use of national resources may be is of no importance as long as it sustains demand.
The Chancellor would agree that it is an approach, but an approach that is in fundamental conflict with that of

the Labour Party. The Labour Party has always taken the view that it is necessary to have public control of investment, that a Chancellor and the Government in general should intervene to guide investment into worthwhile channels. The Labour Party has not taken the view that all investment is good investment, but clearly believes that investment must not only be stimulated in amount, but purposefully directed.
That is the view put forward by the Labour Party in Signposts for the Sixties, a document that I commend to hon. Members on both sides. As I am sure that most of my hon. Friends have already read and absorbed the document, I need only remind them of what they know already, but to hon. Members opposite it will no doubt give a fresh insight into methods of economic planning.
I particularly commend to their attention the section entitled "Planning for Expansion", where it is stated:
…we must have a plan for economic growth…The preparation of such a plan would require the creation of a National Industrial Planning Board …The central directive of this Board would be to ensure speedy and purposive industrial investment.
I repeat, "speedy and purposive industrial investment". That, of course, is where we differ from hon. Members opposite—

3.45 p.m.

Captain Walter Elliot: The hon. Member has just quoted from Signposts for the Sixties. Does he virtually mean that a Socialist Government —should they get in—would take complete control of all our industrial investment in the nationalised industries, in private industry, and in everything else?

Mr. Warbey: Complete control is certainly not the intention of the Labour Party—

Sir Gerald Nabarro: What sort of control?

Mr. Warbey: I was about to read a little more from the document in order to set out some of the ways in which the Labour Party proposes that investment should be controlled. It states:
Financial policies must be directed to seeing that the investment programme is fulfilled.
That implies that we must have a programme of investment. We do not leave


investment to chance—to laissez faire—but have a national plan.
I thought that even hon. Members opposite recognised that, in these days, we have to have some kind of national plan. Hon. Members opposite have approved the setting up of the N.E.D.C., and have read its reports. Some of them have even given some kind of mild approval to N.E.D.C. proposals. But all those proposals involve some concept of a national plan and they necessarily involve some concept of direction or guidance of investment into nationally worthwhile channels.

Sir G. Nabarro: But the hon. Member has not answered my question. He is talking about controlling investment under a Labour Government. What sort of control does he envisage? Is it control over £500 of investment in a new petrol-filling station, or investment in a venture of about £100,000? What is the nature of the control? That is the first question.
The second question is: why is it that the hon. Member's name alone appears on this Amendment? Is it an unofficial Amendment? Why has the hon. Member not the support of the hon. Member for Grimsby (Mr. Crosland)? Was this the Communist wing of the Labour Party?

Mr. Warbey: The hon. Member makes his intervention with his usual courtesy and discretion, and I do not propose to answer any other than his first point, which has some relevance to the subject which the Committee is discussing. Obviously, there would have to be some minimum limit.

Sir G. Nabarro: What is it?

Mr. Warbey: That would be for the Treasury to lay down. I have no doubt that the Chancellor of the Exchequer, if he were prepared to accept the principle of the Amendment, which he would be if he were consistent with some of the principles which he has embodied in other Clauses, would no doubt be able to put forward an appropriate figure. I do not propose to weary the Committee with discussion of trival matters of that kind.

Sir G. Nabarro: We want to be wearied with them.

Mr. Warbey: The Chancellor of the Exchequer has tied his own hands very considerably in the weapons at his disposal for influencing the direction of investment. He and his party have ruled out one very important way, and that is by an expansion of public ownership, which is one of the ways of which the Labour Party approves and to which reference is made in this section of Signposts for the Sixties.
The Conservative Party has admitted in practice that public ownership is a valuable way of influencing investment. The party comes along from time to time with proposals for investment in publicly-owned industry, and when it wants to influence the general volume of investment up and down its favourite way of influencing it downwards is to cut public investment, because it has no direct means of cutting private investment. Therefore, the Conservative Party in practice endorses the value of public ownership as a means of influencing investment.

Sir G. Nabarro: Drivel.

Mr. Warbey: But in theory the Conservative Party has to maintain its doctrinaire approach and the Chancellor of the Exchequer therefore has to deprive himself of this valuable weapon for directing investment in future.
Then there is the method of controlling new capital issues by ensuring that Treasury approval would be required. That has been abandoned by the Tory Party. It was not a very valuable weapon because so many large industries today are largely self-financing and one cannot influence the financing of self-financing industries by controlling new capital issues.
The Chancellor has ruled out very largely the method of direct physical control of industry, with the exception of the rather broken weapon of industrial development certificates. He has, therefore, left himself with only fiscal inducements as a means of guiding and directing investment. How does the right hon. Gentleman propose to use the fiscal inducement? I want to be fair to him. To some extent he proposes a form of discrimination in the capital allowances which he is promoting in the Bill, but


two main forms of discrimination are possible. One is by region and the other by structure. The Chancellor has adopted the regional or geographical discrimination. He has not adopted the equally important idea of structural discrimination.
Regional and geographical discrimination is important, valuable and necessary. It has been rendered necessary by the long neglect of areas of high unemployment, or the depressed areas, by successive Tory Governments. Now, at a very late date, to try to induce industry to invest in these areas in particular, we have the special discriminatory concessions made in Clauses 38 and 39. So far so good, but the Chancellor is not satisfied with that. He is also to give a general tax handout to industry as a whole. In Clause 33, in its unamended form, he proposes that any industry, for any purpose, which engages in new investment, in addition to speeded-up annual investment allowances, to the full amount of 100 per cent. in a period of six to seven years, shall receive an increase in the investment allowance by no less than 30 per cent.
I am in favour of this in certain cases. I am in favour of it because in our present society, with a large part of industry conducted under private ownership, tax inducements form one of the last weapons left in the hands of the Chancellor of the Exchequer to influence investment. Therefore, I subscribe to the principle. All I want is that it should not be an indiscriminate handout of tax relief to all and sundry, but should be handed out only to those who can make good their claim that the investment which they are proposing to make is of national value. This, I should have thought, is a proposal which would commend itself to all sides of the Committee.

Sir G. Nabarro: Not at all.

Mr. Warbey: Let us recognise what we are doing. This is not a relief of tax on expenditure. That is done in the annual allowances, which now amount to 100 per cent. over a period of seven years. But on top of those, as the Chancellor has said, there is something more to come, and that is 30 per cent. of what is purely a notional expenditure—no expenditure at all.
4.0 p.m.
In other words, this 30 per cent. allowance is a straight subsidy to profits.

It is another way of saying to industry, "Thirty per cent. of the cost of what you spend on new plant and equipment can be equilibrated against an equivalent amount of tax-free profits. Profits to the extent of 30 per cent. of the value of the new equipment will be free of taxation." It is a straight subsidy from taxation to industry and it is offered indiscriminately.
The Chancellor does not like the word "subsidy". In November, when he announced his proposals, he objected to the use of the term and said that it represented a reallocation of the burden. What burden is he reallocating? Who bears this burden? It is a substantial cost to the Exchequer. This year, it will amount to only £11 million, but next year it will amount to £50 million in a full year and in three years' time to £130 million.
The Chancellor has cunningly cast the burden of this reallocation on to future Labour Chancellors of the Exchequer. He gets the political credit in the current year, but he passes the burden on to the future. We have, therefore, a combination of retrospective legislation with prospective payment of the cost of it, and the cost will fall squarely and unfairly on the shoulders of the individual taxpayer.
The cost of these tax reliefs will not be paid by private industry. Although private industry will be encouraged and allowed to make bigger profits, these will be tax-free profits. The cost will be paid by the individual taxpayer, whether the direct or the indirect taxpayer, by having in future years to pay more in Income Tax, more in Purchase Tax and more it Excise duties than he would otherwise have to pay if these reliefs had not been given to private industry to enable it to make larger profits. Let us, therefore, be clear what is involved. This is calling upon the individual taxpayer to subsidise private industry to enable it to make bigger profits. One could make a case for that if it could be proved that it was in the national interest that that should be done. Of course, it is in the national interest that we should have more worthwhile investment, but not that there should be more worthless, useless and futile investment.
If we allow this proposal to go forward unamended, its effect will be that the individual taxpayer is called upon to subsidise the manufacture and construction of unneeded petrol pumps, breweries and bingo palaces and the equipment of lavish office blocks and hotels. The taxpayer will be asked to subsidise the investment of new machinery for the making of more cigarettes per worker and, quite possibly, for the installation of automatic contraceptive vending machines in brothels. The Economic Secretary appears to be shaking his head. I do not know why. There is no provision in the Clause which makes it possible for the Chancellor to refuse this tax concession to any firm or industry making anything for any purpose whatever.
The effect of all this will be to weaken the advantages offered in the development districts, because if in the whole of the country any firm which engages in new investment can get not only speeded-up 100 per cent. annual allowances, but a 30 per cent. Tax-free hand-out in addition, what inducement is there for anybody to go from the south-east of England into the North or to Scotland to expand in those areas? Therefore, the effect of non-discriminatory allowances under Clause 33 will be to weaken the advantages offered to the development districts in Clauses 38 and 39.
The problem which the country is facing is one of the proper use of its scarce natural resources. Every time we deal with public investment, Ministers come forward and tell us that there is a limitation on what we can do in public investment because we cannot stake too big a claim to the national resources of workers, plant, equipment, materials, and so on. The Minister of Housing and Local Government tells us that we cannot invest more in council housing because the resources of the building industry are wanted for other things. The Minister of Transport says that we cannot build motorways faster and we cannot build a Channel tunnel because there is a limitation on the available national resources.
The Minister of Education slashes the programmes of the local educational authorities for school building because he says that the nation cannot afford as high a rate of investment in the building of

schools as the local education authorities want.

The Economic Secretary to the Treasury (Mr. Edward du Cann): May I draw the hon. Member's attention, in case he has not seen them, to my right hon. Friend's remarks on education in his Budget speech, when he indicated that expenditure on education this year would be rising by 10 per cent. I quote only one example out of many to which the hon. Member is referring in which he seems to have his facts completely wrong.

Mr. Warbey: If the hon. Gentleman looks at the statements made by the Minister of Education only in the last two or three months about the programmes for school building submitted to him by local education authorities, and the proportion of those programmes which he has approved, he will find that in England and Wales the Minister of Education has approved capital expenditure on less than one-third of the proposals submitted to him by the local education authorities. These are the facts that the hon. Gentleman should study. The education authority with which I am concerned, the Nottinghamshire County Council, had its programmes slashed by nearly 75 per cent.

The Chairman: Order. We are in danger of getting rather a long way from the Amendment.

Mr. Warbey: I recognise, Sir William, that I was led somewhat astray by the Economic Secretary into giving more detail on the point than I wished to give, because I had thought that the facts were well known to the hon. Members and that it would be quite sufficient to illustrate them by one or two examples. I think that I have established the point. One can refer, also, to the limitation on the building of hospitals required by hospital management committees to show that the Government do, in fact, restrain public investment because there is a limit to the amount of physical resources available at any given time for these admittedly necessary and worth while purposes.
All I ask is that we should do the same for private industry. We should tell private industry that, if it stakes a claim to use scarce national resources for worthless projects or projects of limited value, we shall not give it a 30 per cent. tax


free hand-out. If industry wishes to squander national resources on frills and trimmings, there should be no taxpayer's money forthcoming as a gift.
On the other hand, if industry uses its money for promoting exports, for investment, to save imports by making the kind of sophisticated equipment which we are at present importing, for providing equipment for schools, and hospitals, for building roads and rolling stock, for enhancing the growth of the more advanced sections of our industry in telecommunications, nuclear power, plastics and so forth, then it should have its reward.
If industry wishes to employ national resources on useless or worthless purposes, purposes which are not in the national interest and which do not accord with our conception of a national plan and social value, there should be no gift.

Mr. Raymond Gower: I am surprised that the hon. Member for Ash-field (Mr. Warbey) was so critical of Clause 33 as it stands because, both during the Budget debate and the Second Reading debate on the Bill, I had the impression that all parties, including the official Opposition, approved the general principle of increasing investment allowances. I was surprised to hear him describe investment allowances as a sort of giving away of money unnecessarily.

Mr. Warbey: I did not say that.

Mr. Gower: Well, then, the hon. Gentleman used very disparaging terms which seemed to be completely at variance with the attitude to investment allowances which has been shown by the Opposition in this year's debates and in previous years when, on many occasions, they pressed for this kind of tax incentive to industry. I see the point at that which the hon. Gentleman is aiming, but he will not be surprised to hear that I regard his suggestion as most undesirable.
I have the highest opinion of the Chancellor of the Exchequer and my hon. Friend the Economic Secretary. They are men of great ability. I have the highest opinion of their advisers in the Treasury, too, but I know that all of them would be the last to suggest that they could today forecast what industries will, in the future, be of the greatest value to

this country. They have not the equipment to enable anyone to make that assessment.
Who in Japan, after the war, could have foreseen that the export of small transistor radio sets would be a more important industry for Japan than some of the large industrial undertakings? Who in Switzerland, some generations ago, could have foreseen that it would be far more important for Switzerland to make watches than to make large machines? Who in Jamaica, two generations ago, could have foreseen that the export of cigars to Western Europe would become one of that country's major industries? It is impossible for ordinary industrialists, Treasury experts and Ministers to make that sort of assessment of the future.

Mr. Warbey: I am grateful to the hon. Gentleman, since he is making a strong point about the ignorance of Ministers in the Treasury and the Board of Trade, but will he explain how they manage to decide upon the grants, subsidies and loans which are made to agriculture, shipbuilding and other sections of British industry?

Mr. Gower: I accept that there are certain industries which all parties in the House and in the country have, for particular reasons, sometimes with reluctance, decided should receive special treatment.

Mr. Warbey: Does the hon. Gentleman approve?

4.15 p.m.

Mr. Gower: On balance, I do, but I do not wish to develop that now.
How many people, after the end of the war, could have foreseen that the export of shoes would become one of the major industries of Italy? Can anyone say that the export of ladies' hats may not become one of our best industries in the future? We do not know. Presumably, the hon. Gentleman and the Treasury experts of a Labour Chancellor, if he had his way, would apportion the benefit of the Clause to certain industries. No doubt, they would do it with the best of motives, saying, as the hon. Gentleman said, that it was important to develop the plastics industry, that it was important to give special benefit to the improvement of power stations, and so forth, but they would say that it was


most undesirable, as the hon. Gentleman said several times, to spend money on hotels.
If France, Italy and Switzerland had followed his advice, they would not have expanded enormously their tourist industries. It is happening here too, but those three countries have done far more. The tourist industry in Switzerland is a far greater earner than many of the industries which the hon. Gentleman appeared to regard as desirable.
Although our motives would be of the highest, we might, if we followed the hon. Gentleman's advice, be doing a disservice to our country's future economy. It is impossible for us now to say with certainty that a particular industry will be the most desirable in 1967. There may today be an unknown citizen with an idea whose little industry, which would not enjoy the benefits of the Clause if the hon. Gentleman had his way, might conceivably, by 1967, be doing far more for our economy than some of the present established industries. Who could have foreseen, twenty or thirty years ago, that the development of efficient trading as exemplified by Marks and Spencer would be more beneficial to the standard of living of the people of this country than expenditure on some of the heavy industries? That sort of trading has created, undoubtedly—

Mr. H. Rhodes: The hon. Gentleman asks who could have foreseen, twenty years ago, that a certain type of retail trading would become enormously important, and he mentioned Marks and Spencer. Lord Marks did.

Mr. Gower: Precisely, but under the Amendment Lord Marks and his company would have no concessions of any kind.
On the other hand, according to my theory and the theory of Treasury Ministers, no one will have priority. By and large, all will have the same sort of treatment. This is why I say that it is wrong for the hon. Gentleman, or for Treasury Ministers under his prescription, to try to determine the future trends of trade and industry. It is for the different branches of industry to prove their efficiency and value.
There are many other examples to illustrate the objection to the Amend-

ment. In many countries today, there are earning valuable export income industries which have grown up from very small beginnings. The hon. Member knows as well as I do that the transistors, cameras and cigarette lighters of Japan, in particular, are earning currency all over the world, as is the camera industry of Germany.
This Amendment represents a most undesirable suggestion. [An. HON. MEMBER: "Socialist."] I do not necessarily say that it is Socialist. My hon. Friend the Member for Kidderminster (Sir G. Nabarro) has made a valid interjection even though his method of doing so may have been subject to criticism. The hon. Member's name alone appears against the Amendment, and that is significant. I am sure that his Front Bench does not agree with this Amendment—at least, I sincerely hope that it does not—and I trust that my hon. Friend the Economic Secretary will have no hesitation in rejecting the Amendment.

Mr. G. R. Mitchison: I hope that I will be able to save the Committee a little time. I do not propose to follow the hon. Member for Barry (Mr. Gower) in such thorny questions as ladies' hats, Jamaican cigars, Japanese transistors and heaven knows what else. He may take it that I disagree with most of what he has said.
My hon. Friend the Member for Ash-field (Mr. Warbey) spoke for himself with his usual sincerity and independence.

Mr. Gower: No doubt.

Mr. Mitehison: It will be a sorry day when hon. Members on both sides cannot express their own views in discussion on the Finance Bill.

Mr. Gower: Hear, hear.

Mr. Mitehison: However, I think that my hon. Friend has rather more than that to commend his Amendment.
It follows the lines of Amendments which we on this side have put forward over a number of years, although in a quite different context. It is substantially the same sort of Amendment as has appeared on the Notice Paper, but in a different context, a good many times. We have very respectable support here—I agree that it is fairly recent, but it is all the better for that—because the first


sentence of paragraph 173 in the chapter on taxation in the National Economic Development Council's Report on Conditions Favourable to Faster Growth reads:
The Tucker Committee and the Royal Commission on the Taxation of Profits and Income suggested greater discrimination in the use of initial and investment allowances to further the aims of national economic policy.
I shall not go beyond that, because my hon. Friend the Member for Grimsby (Mr. Crosland), if he has the good fortune to catch your eye, Sir William, will have a good deal to say on the Clause as a whole. I am simply dealing with the Amendment.
There is quite a lot to be said for the Amendment in its proper context, but, unfortunately, the Chancellor of the Exchequer, as long ago as November, said that he would make the concession which is embodied in the Clause. Without going into the merits of it, which, again, I prefer to leave to my hon. Friend the Member for Grimsby, the concession was publicly announced to come into operation, presumably, when he found the opportunity of getting the House of Commons and this Committee to vote in favour of it. Of course, one can make criticisms about that kind of procedure. It is a rather remarkable way of treating taxation questions for the right hon. Gentleman to say a good many months beforehand, and, speaking merely as a Member of the Government, to anticipate the rights of Parliament in dealing with these matters when the time comes.
None the less, the statement was made. There can be no reasonable doubt that a number of people in the country must have read it and either took some action on it, or, at any rate, considered taking action on it. When the proposal has been passed without any major criticism from our side of the Committee, it is out of place to introduce an Amendment now which would have the effect of whittling down the concession as a whole.
This Amendment originally appeared on the Notice Paper in a different form, and, in that form, it would have given an additon to certain cases. It is not on the Notice Paper in that form now, and I can say no more about it, but that would have been a different matter. The effect of this Amendment would be to whittle down the concession in a number of cases and to allow it in others on the

sort of conditions which my hon. Friend has explained with such sincerity and a certain eloquence. In that form, the majority of us on this side do not feel that we can possibly support it.
I make it perfectly clear, however, that that is not because we differ from the N.E.D.C. in the sentence which I have read, which seems to me perfectly right. It is not because we withdraw in any way the arguments which we have put forward on similar proposals in a different context in other Finance Bills, but simply because, having regard to what was said in November, and to the Clause as a whole, we feel that it is an inappropriate Amendment to introduce and does not really represent our view in this context.
We do not wish to be told that we are lagging behind such austere and revered bodies as the Tucker Committee and the Royal Commission on the Taxation of Profits and Income, not to mention the N.E.D.C. We think that there is a very great deal to be said for this kind of thing in its place. But here we have a concession announced several months ago —I think wrongly and, perhaps. rather unconstitutionally, but, nevertheless, announced—and it is now sought to put it in legislation. I do not see how we can at this stage possibly stand for this sort of derogation from it. It would be unfair to a number of people who would have acted on the original statement.
For those reasons, I trust that my hon. Friend will not press his Amendment, which, as has been pointed out, stands only in his name. I spent a very long time on the back benches myself—perhaps I should be there now—and I was glad to see the general approval in the Committee for independent views which are sincerely expressed, particularly on a complicated matter of this sort.

Mr. du Cann: I entirely agree with the hon. and learned Member for Kettering (Mr. Mitchison) that it would be a sorry day for the House of Commons if it were not possible for individual hon. Members to express the views that they hold without fear or favour. As one who practised independence in the past, and who is quite willing to practise it again in future if need be, I entirely agree with that view and have every sympathy for it.
The hon. Member for Ashfield (Mr. Warbey) probably will not expect me to reply to him at length, for two reasons:


first, because my hon. Friend the Member for Barry (Mr. Gower) replied to him in excellent and clear terms and answered a number of his points, which saves me that trouble; and secondly because, as the hon. and learned Member for Kettering said, there is considerable difference between an Amendment which appeared on the Notice Paper a little time ago, and which, perhaps, was argued last year to some extent, and the rather fuller Amendment which the hon. Member for Ashfield has proposed today.
I do not want the hon. Member for Ashfield to think that, because I shall not reply to him at great length, I agree with what he has suggested. I must tell him as clearly and frankly as I can that I fundamentally and totally disagree with most of what he said. He spoke about signposts. I think that I had a clear signpost of the way in which his mind was working. He is in favour of more nationalisation and, apparently, of very strong Government control of the economy in all its details. He would prevent new petrol stations from springing up.

Mr. Warbey: Unwanted.

Mr. du Cann: The hon. Gentleman says "unwanted" petrol stations, but I am sure that no one with a commercial mind would build a petrol station or go in for any other consumer enterprise unless he felt that it was wanted. I am sure that the majority of the Committee will agree with me that the fact that commercial enterprise of one sort or another has led to improvement in the standard of life of our people is something to be pleased about and not something to denigrate. I am delighted at the improvement in the standard of life that we have had in this country even since the war. Long may it continue, and long may independent private business serve the community in the splendid way in which it does.
4.30 p.m.
The Amendment on its own, without the hon. Gentleman's explanation, was certainly very plausible. But to come away from political argument, I hope that he might agree with me, when I have finished talking, that it is simply not practicable. The intention in the Amendment is that the increase in the investment allowances proposed in

the Clause shall be given only if these assets are provided in an industry
prescribed as of national importance or on machinery or plant prescribed as of special national importance.
The criterion which the hon. Gentleman adduces for judging that is whether the products of the industry or the use of the plant and machinery is of special value
in increasing exports, saving imports, promoting technical development or the better use of national resources.
I think that that is a clear summary of the position.
I dislike very much the suggestion made by the hon. Gentleman that the improvements in these investment allowances were a form of subsidy. How can it be a subsidy not to tax people as much as one could tax them? It seems to me to be equivalent to the awful phrase, which I hate to see, that the Chancellor has given away so much money.
The Chancellor to use the newspaper phrase does not give away anything. He fails to take it from people, which is a very different matter indeed. The hon. Member for Ashfield was suggesting that it was quite wrong to subsidise certain industries and I repudiate that term. The object of my right hon. Friend's exercise here is to create more trade, business and jobs and a higher level of prosperity. I think that that is a thoroughly desirable objective.
I wonder whether the hon. Gentleman has ever stood by the side of a pool and thrown a pebble into it. As the world knows, the ripples spread, and that is what is happening to the British economy at present, as the figures for industrial production so rightly show. In other words, what my right hon. Friend is seeking to do is already being achieved.
It is so easy to pick one rather disgusting and nasty example, as the hon. Gentleman did, and to say, "Do we really want to give additional help to this industry?", which I believe to be no industry at all in the terms in which he described it, and to ignore totally the good which is being done.
That is where I fault the hon. Gentleman's argument particularly. What I wanted to do was to show the way in which the Amendment was defective in


practical terms. The Amendment is, in fact, defective in its wording. If the hon. Gentleman will look at subsection (2) he will see that the second phrase does not fit the first. Perhaps that is a detail. I am quite willing to agree with the hon. and learned Gentleman the Member for Kettering, who so modestly made the point that drafting is always extremely difficult, but it is appropriate that I should make the point. It will give him the opportunity no doubt of putting it down in an amended form next year. We shall look forward to that.
The hon. and learned Member referred to some discussion on this matter last year and he was quite right to do so. I thought that his hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in speaking to this point last year—a rather different point, as the hon. and learned Gentleman said—was very fair indeed. He said that if we were to provide arrangements of this type or something like them arbitrary decisions would be involved. This is perfectly true. This is where the weakness of the argument plainly comes.
My hon. Friend the Member for Barry was very eloquent in saying, "How can anybody, however skilful, or however well-informed, judge which industries will be those that matter most to Britain in the future?" From what I recall of history many people had good ideas in the past, and produced new developments with which they wished to press on. And the pioneers, the adventurers, were precisely the people who were laughed at, whether they were the aviators, or the inventors of mechnical devices of one sort or another.
To quote an example from my own experience, I remember that when I established a business five and a half years ago all my friends and all the informed commentators whom I met were honest enough to say to my face that they did not think that I could last six months. That experience is by no means unique. Yet we have to have these arbiters, apparently, to say what are the right things and what are the wrong things for the national economy. I believe that this would lead us into great difficulty.

Mr. Warbey: Will the hon. Member say whether he approves or disapproves

of the action of his colleague the Minister of Power in directing the National Coal Board to take the arbitrary decision of closing a number of coal mines and rendering a number of men unemployed, or compelling them to look for other work?

The Chairman: Order. If the Minister were to reply in detail he would get far beyond this Amendment.

Mr. du Cann: In these circumstances, I obviously cannot reply in detail, but I would say, in general, that I think that that is a rather different matter, as, indeed, you have indicated, Sir William. I have the greatest confidence in my right hon. Friend the Minister of Power and all that he is doing.

Mr. J. T. Price: The Economic Secretary has been doing quite well up to now, but if he gets any more polemical I shall be inclined to have a go myself; but I do not want to. What he is saying, in effect, in his last few remarks, is that many enterprises from small beginnings have turned out to be flourishing corporations, with great benefits to the national economy, and that is nationally a good thing. I agree that it is a good thing, but the converse of the argument is that a great deal of activity in this country is quite useless. For example, the massive building of office blocks in every city at the expense of houses is a matter of priorities. Surely the use of a great deal of our activity in making useless things cannot be justified. I think that the Minister is getting into polemics and falling into the errors that my hon. Friend fell into.

Mr. du Cann: I hope that that intervention, at any rate, will satisfy the hon. Member for Westhoughton (Mr. J. T. Price), who will feel that he has made his point. Obviously, it was a reasonable and sensible point. On the one hand, how can we in Parliament pass legislation to say to industrialists and commercial people, "You must provide higher standards for the people working in your offices", and, on the other, forbid them to build? It does not make any sense at all.

Mr. Price: It stops the building of houses.

Mr. du Cann: It does not stop the building of houses, if I may say so with


some asperity to the hon. Gentleman, because house building has been continuing at a very high rate for a number of years, and that is a very satisfactory thing, too.
The point in general is not invalidated. Someone would have to make arbitrary decisions. It is suggested by the hon. Member for Ashfield that it would be the Treasury. I am flattered that he should suggest that, and so I am sure is my right hon. Friend. Without doubt, an extraordinarily heavy and invidious burden would be placed on the Treasury. It means that the Government have to take the whole responsibility as arbiters of deciding what is right and what is wrong for our economy. That would not be either successful or satisfactory. I believe it would be quite the reverse.
My right hon. Friend is now proposing increases in investment allowances generally for all assets of the kind for which investment allowances can be given in all industries. The point at issue now is whether he should abandon that general approach, as the hon. Gentleman suggested, or concentrate on specific cases said to be of particular national importance.
What is plain, as the hon. and learned Member has emphasised, is that it is obviously out of the question for my right hon. Friend now to cut down a relief which he announced as long ago as 5th November last, for obviously, a degree of expenditure has now been undertaken. The hon. and learned Gentleman said that it was rather naughty to do that. Perhaps that is a matter that we shall be going into later; but let us be clear about this. What has been done has at least had some success, and it is right to be pleased about that, for what matters to everybody on both sides of the Committee is that the economy in general should be moving forward—and that is what is happening.
What was surprising about the hon. Gentleman's speech was that he took no account of some of the points made in the debate last year. For instance, he did not deal with the question of whether or not his proposals would run counter to our international obligations. That has to be thought out very clearly. Nor did he deal with another point raised last year, on the subject of saving

imports. Does he intend that agriculture is to be fully brought in? Does he mean that the most generous treatment will be accorded to agriculture? That requires an answer.

Mr. Warbey: It would.

Mr. du Cann: The hon. Gentleman says "It would". Has he really looked into this with care to be able to detail the costs which are involved? I do not believe he has. He said nothing about that. The hon. Gentleman suggests that we are quite wrong to give incentives to many industries. He instanced holes in the ground, which would certainly not qualify for investment allowance unless they were for building dry docks, mines or some other useful purpose. He instanced examples of that sort without appreciating not only that those are practical arguments against his suggestions—and he failed to answer them—but that what has been done is patently in the general national interest.
I put it to him that it would surely be extraordinarily difficult to decide between the competing claims that would be made. Cannot he imagine the pressure that would be brought to bear in Parliament and outside for other industries to be included in the list when the announcements were made about what industries were or were not to qualify?

Mr. Warbey: As there is already.

Mr. du Cann: The hon. Gentleman says, "As there is already". We are dealing with Clause 33, which, according to my understanding, has been warmly welcomed by industry and the country as a whole. What the hon. Gentleman says is, in fact, not correct.
I could carry on a great deal longer on this whole subject, but I will not. As I said at the beginning, I frankly think that the hon. Gentleman's suggestion, though plausible, is not practicable when one reads the Amendment. Frankly, I very strongly disagree with the reasons that he advanced in favour of his Amendment, and I disagree even more positively with the sort of extreme thinking, if I may say this to his face, that it seemed to me was very much in his mind in advancing his cause.

4.45 p.m.

Mr. J. T. Price: As the Minister was good enough to give way to me, I should


like to try in a few moments to make my position clear, as I do not wish to leave the Committee in any doubt about where I stand. There was a bit of a hubbub on the benches opposite during the brief intervention that I made. So let me now make the position clear.
I accept that the Amendment in this context is not the right way to deal with this matter. At the same time, I think that my hon. Friend the Member for Ash-field (Mr. Warbey) has done a service to the Committee in giving us the opportunity to ventilate a most important question of principle.
My hon. Friends and I, in previous Finance Bill debates, have given support, verbally and otherwise, to proposals that investment allowances should be promoted for the revival of industry arid in order to give encouragement to the industrial growth that the country needs. Nevertheless, I do not think that any of us are so unsophisticated as to believe that when we give such a blanket concession as this it will not encourage the wrong people. This provision was, in fact, on the Statute Book under a previous Finance Act. I say that since my hon. Friend seemed to assume that investment allowances were something new. They are nothing of the kind. They were on the Statute Book at 20 per cent. last year. All that the present proposal does is to increase the allowance to 30 per cent. I am prepared to support that policy in the general economic interests of the country.
I was about to say that I am not so foolish as to suppose that a great deal of encouragement will not be given to the wrong people by this sort of thing. We are all aware that industry and finance are very flexible instruments by means of which activities are attracted to those spheres in which the highest profits are likely to emerge. Therefore, I accept that this Bill, this part of which, dealing with investment allowances, the Opposition are supporting, will have the effect of stimulating some activities which are undesirable.
To illustrate that point, I have been active on many occasions in the House of Commons in criticising the Government's betting and gaming policy. I refer to this subject only in its industrial context. Betting and gaming have caused many operators and speculators to seek

licences to build large amounts of flashy premises throughout the country, and large numbers of premises have been obtained at very high prices for the site value and very lush buildings have been erected on them. Also, vast sums have been spent on furnishing in the most orientally opulten fashion. There are gaming houses which are undermining the moral standards of many people.
I am taking the opportunity of this Clause to ventilate that problem. It can perhaps be described as a chip on my shoulder. Many of the people who are engaging in activities which I, from my ethical view of society, would regard as undesirable, are being encouraged by Government allowances further to extend their activities. The Minister cannot deny that. I thought that the Minister was going a little far in getting a little polemically emotional about it. I hope that my speech is fully factual and devoid of any emotion. These are the hard facts of the situation. When we try to offer a big concession of this kind, we do a great many undesirable things and a great many unscrupulous and undesirable people cash in on the concession.
I live in and represent a large tract of the central Lancashire industrial area, where the unemployment position is very serious, and I am looking to the provisions of this Bill to improve the prospects of my constituents in getting back to work and improving their living standards, which is the right of every man. But I am by no means sure that the Bill in its present form will do that. I say that because the investment and depreciation allowances are unlikely to attract industry to my part of the country, because there is no certificate in existence defining it as a development district.
This may be widening the scope of the debate, but I have been encouraged or goaded into this intervention because much of what the Minister said was in principle and philosophy "phoney". One cannot do something like this and have the general effect that he supposed will occur, because other factors will creep into the equation.
This will encourage industry in the ordinary play of the financial markets and in the kind of considerations which weigh with industrialists and economists.


But it will also encourage industry to go to places where the concessions are highest and will cream off the prospects of getting it into such areas as that which I represent.
I take this opportunity to make a mild protest, because this will not produce all the good results that the Economic Secretary imagines. Perhaps what I say would be more appropriate in discussing the Clause as a whole, but it is linked with the Amendment. Do not let us be so smug and self-satisfied as to imagine that, because a thing has a general element of good in it, it will not have some adverse effects which we on this side of the Committee, as Her Majesty's dutiful Opposition, are bound to criticise.

Mr. du Cann: Gaming premises are not industrial buildings and are, therefore, not affected by the Clause.

Amendment negatived.

Question proposed, That the Clause stand part of the Bill.

Mr. Bruce Milian: This gives us an opportunity to say something in general terms about investment allowances. There are two main reasons for looking closely at what is proposed: first, the granting of these allowances reduces the burden on the taxation of profits generally; and, secondly, the element of discrimination involved.
Obviously, therefore, if we are to take this line we should at least do so with our eyes open, If the Government had decided to reduce the profits tax they might have got a rather less charitable reception. But, in practice, an increase in investment allowances means a reduction in company taxation. In a full year this proposal will cost about £69 million. Therefore, we must look at it very carefully.
The question is whether it is worth while, as a general principle, to give incentives to invest by means of investment allowances. I think that anyone would come to the reasonable conclusion that it is desirable to give incentives in this way. Everyone agrees on the need for a high level of industrial investment in this country. In fact, it used to be one of the main arguments about our comparatively poor record of economic growth that we did not manage to sustain a

high individual level of private investment. I am not sure that that criticism is as accurate now as it was several years ago.
It is still perfectly valid to say that we do require a high and sustained level of private investment. But there is a need to emphasise the word "sustained". Private investment has, of course, suffered, as have other things, from the Government's general "stop-go" economic policy. It is worth pointing out that the investment allowances originally introduced for plant and machinery in 1954 lasted in the first instance for less than two years. From February, 1956, until April, 1959—more than three years—there were no investment allowances in the normal line of things, either for industrial buildings, or for plant or for machinery.
While the Government are congratulating themselves today that under this Clause the level of investment allowances is high, and that a very considerable advantage has been given to industry because of it, then it is worth reminding them that from 1956 to 1959. when our economic progress was not exactly brilliant, there were no investment allowances. Indeed, I think that the fact that investment allowances stopped during those years is only another example of the kind of approach to our economy that the Government have shown in so many different directions.
It is not, of course, any use expanding industrial investment unless one can be reasonably sure that the new capacity will be used. I hope that the Government have learned this lesson now, because we have had the situation of increased private investment leading to nothing like the increased output we should have got, simply because the rest of the Government's economic policy was not designed to keep up sustained economic growth.

Mr. Gower: Will not the hon. Gentleman agree that a large proportion of industrial production is directed to foreign consumers, and that no Government can ensure at all times that foreign consumers will be willing or even able to sustain their purchases?

Mr. Milan: That may be so, but our unemployed were not foreign. They were domestic consumers. The fact that


we have had so many unemployed has contributed very considerably to a reduction of demand and thereby to the fact that in many of our major industries—steel is the most obvious example —production has been far below the installed capacity. In strict economic terms a good deal of our capital investment has been wasted.
While it is certainly true that investment allowances are a stimulus to investment, and that we want to encourage investment by such means, it is also true that if we could get a sustained economic growth we could get the same level of industrial investment with considerably lower investment allowances than the 30 per cent. introduced by this Clause. There is a case for saying that investment allowances are part of the very expensive payment we have to make for the failures of the Government's policy.
I turn all the more readily to discrimination, because I thought that the Economic Secretary's reply to the Amendment was absurdly exaggerated. I was extremely disappointed that he took that line. It should be pointed out that, in the nature of things, investment allowances are discriminatory at present. For them not to be discriminatory one would have to have the situation in which the capital structure of one industry was exactly the same as that of another. Each industry would have to be capital-intensified and labour-intensified to the same degree for investment allowances to give completely equal benefit to all. But that is not the case.
It may well be that within an industry it is right to give a certain advantage to a firm which is more capital intensified because, on the whole, that will be the more progressive firm and well worth encouraging. But, looking at comparisons between industries, the fact is that some industries lend themselves to capital intensification in a way that others do not. The different levels of capital intensity, comparing one industry with another, would not merely be an indication of different levels of efficiency. Thus, investment allowances are by nature discriminatory. I was sorry that the Economic Secretary did not seem to recognise that.
5.0 p.m.
Not only that, but the Government themselves have applied discrimination in a number of other ways, quite apart

from the discrimination inherent in the principle of investment allowances. For example, during that period of three years between 1956 and 1959 when, generally speaking, investment allowances were not paid, they were paid for the insulation of industrial and agricultural buildings at a rate of 20 per cent. and for fuel-saving plant and for assets expended on scientific research. What is more, ships, as a form of capital expenditure, have had a special discriminatory rate of investment allowance of 40 per cent. since April, 1957.
In other words, the Government have definitely adopted discrimination as a matter of policy, and it is worth pointing out—and this follows what the Economic Secretary said about betting shops—that no investment allowances are paid for commercial buildings, office buildings. That may or may not be right, but the fact remains that there is discrimination and it is absurd for the Government to pretend that there is not. The new benefits which are to be given by free depreciation introduce discrimination between different areas of the country and while that kind of discrimination does not apply to the granting of discriminatory investment allowances it will have the same effect as would have been obtained by adopting a method of discriminatory investment allowances on a regional basis. Again, I say that discrimination is absolutely inherent in the system.

Mr. Warbey: I noticed that the Economic Secretary nodded with approval when my hon. Friend said that commercial buildings did not qualify for investment allowances. That is perfectly true, but firms manufacturing equipment for office bulidings or hotels do qualify for investment allowances.

Mr. Milan: I agree that that is so, but it does not invalidate my argument that there is discrimination and that one often does not see any particular justification for some of the discrimination which is now applied.
This discrimination could all be applied at a much lower level than the 30 per cent. for industrial plant and machinery and the 15 per cent. for industrial buildings which are recommended in the Clause. I am not in any sense suggesting that the Clause is wrong, because I agree basically with my hon. and learned Friend the


Member for Kettering (Mr. Mitchison) that when this proposal was announced we accepted it at the time, so that, apart from anything else, it would be a breach of faith to start criticising it now.
But it is worth making the point that our investment allowances have now reached quite substantial levels and it is, therefore, very important that we should look at them rather closely. Even on this point of commercial buildings, for example, there may not have been as strong an argument when the allowance was 10 per cent. on industrial buildings and none on commercial buildings, but when the allowance goes up to 15 per cent., the discrimination against office buildings becomes that much higher, and it is worth studying the matter more closely. Another discrimination is that motor cars have never had an investment allowance, although there are many businesses in which motor cars, perhaps quite legitimately, form a good deal of the captial equipment.
In principle, there is a very strong case to be made for discrimination. I know that it is very easy for the Economic Secretary to say that this is an extremely complicated subject and that any Government which attempted to apply discrimination on any really selective basis would be putting themselves in almost insuperable difficulties, but I am not sure, if we are to maintain investment allowances at something like the current level, that we ought not to try to make that kind of discrimination effective.
If investment allowances were much lower, the problem would be much less, but if we are to look upon investment allowances as having the importance in our taxation system generally which they have at the levels proposed by the Clause we have to consider discrimination.
The argument which is usually used against that is that since investment allowances are favourable to capital intensive industries, they are likely to be about right, because on the whole it is the capital intensive industries which we want to encourage as being the industries likely to contribute most to the country's economic expansion. However, I should like to give just one example of the fallacies which can lie behind that argument which is probably sound on the whole.
One of the industries which is commonly quoted in the context of the argument that investment allowances are too high is that of television set hire, which gets 30 per cent. investment allowance on the sets put out for hire. That does not encourage investment in television sets, but it gives the hire company an advantage over the company selling sets outright or on hire purchase. That is the only economic effect which the investment allowance has.
However, when we come to that part of the electronics industry which is more important from the point of view of the British economy, the producing side, it comes as a surprise to read in the first Report of the N.E.D.C. that the electronics industry is a labour intensive and not a capital intensive industry. This is the kind of industry which we want to encourage and yet, relatively speaking, this is the kind of industry which comes off badly with investment allowances. It is a surprising result that the producing end of the electronics industry, the end which we want to encourage, comes off rather badly, being labour intensive, whereas the companies which hire television sets get 30 per cent. investment allowance.
I am not suggesting that there is any easy answer to this problem. Perhaps some of the things I have said have been rather too critical of the Clause and repeat that we ought to stimulate investment in this way and that the Clause is to be welcomed. However, I would have liked the Economic Secretary to have shown, as I hope he will in his later answers, more sign of having understood some of the implications of Government policy on investment allowances. Very important implications are involved, particularly if we are to have investment allowances at these extremely high levels, and it is very important that we should try to clarify some of these issues.

Mr. Rhodes: Many things have been said about discrimination in investment and I hope that the Economic Secretary will take the opportunity to clarify some of the points which have been made Some of the statements made today have been most interesting, because they have made it clear that it is impossible to pre-diet, that it is a bad thing to predict, whether an industry will be important to the economy in a few years' time.
This change has been going on throughout the industrial revolution. There have always been predictions, and the wisest and cleverest people of the day have been proved right in a few years as a result of their astuteness. During this century we have had the tremendous examples of Germany and Japan predicting what lay ahead. Germany predicted the change from one type of industry to another, and as a result made a powerful and sustained revival after being completely devastated. Germany changed from light to heavy industry. It is interesting to note that light industry, on which that country had been engaged, and from which it gained considerable experience, formed a high proportion of the world's trade at the beginning of the century, but since then there has been a steady change from light to heavy industry among the industrial nations of the world.
The question is asked: what made Japan decide to make transistors? We work on a different basis from Japan in the way in which we order our affairs. It is impossible to predict what they are going to do. The whole question is tied up with a national programme which is aiming more and more at getting a larger share in the industries which are expanding in world trade. They are not very interested in those industries in which they have a share of the world's trade, but which are not expanding.
The point that we are discussing this afternoon impinges to some extent on this question of discrimination and the planning of our industries. I should like to deal, first, with the importance of investment allowances, because the effectiveness of these allowances has been argued at great length by the financial pundits and others during the last year. The history of investment allowances is somewhat chequered. One might almost say that it is Exchequered, because it seems to fit into the stock remedies for improving the economic situation, together with relaxations of credit, Purchase Tax cuts, the lowering of hire-purchase deposits, and all the conventional army of Treasury devices.
My hon. Friend the Member for Glasgow, Craigton (Mr. Millan) outlined the history of investment allowances, and I need not go over it. What my hon. Friend sad proves conclusively that the

Treasury regards investment allowances as an adjunct to the other facets of our monetary and fiscal policy. My opinion is that the advantages to be gained by industrialists are limited and should be considered by them and the Treasury in terms of what effect they have, first, on the use of less floor space to produce more, and, secondly, in industries where world trade is increasing, and in areas of chronic unemployment where extraordinary measures are necessary, what effect they have on improving the situation.
5.15 p.m.
Investment allowances on their own will not provoke expansion. Time and again we have been told by the Chancellor of the Exchequer, in first-class speeches both in the House and in the country, what we need to do. The Chancellor has been seeking to increase the confidence of businessmen in the economy. Different people put forward different arguments about how confidence can be restored. It is said that the directors of public companies can play their part by increasing dividends so that the Stock Exchange has a little more confidence that things will improve.
It is said that the Chancellor of the Exchequer, the Prime Minister, or somebody equally important, should draw attention to the Gallup poll to show that there is less risk of a Labour Government corning into office. It is said that the Chancellor of the day should be prepared to take risks with the balance of payments position. But all this has to happen before there is sufficient momentum in the economy to create the necessary confidence in the manufacturing industries to lead to increased investment in them.
If we are right in assuming that investment allowances are directed at manufacturing industry, as the Economic Secretary suggested when he belittled the argument of my hon. Friend the Member for Westhoughton (Mr. J. T. Price), we must remember that before there can be any improvement in the economy, manufacturing industries have to expand. When we think in terms of the 4 per cent. growth which has been suggested by N.E.D.C., we include a number of factors which do nothing to help the expansion of our economy. Such factors as education, health, and the building industry come into the picture. Con-


fidence in the economy is usually highest at the peak of a boom period when manufacturers have the confidence to invest, but, as we saw in 1960–61, the investment very often takes place too late, and at too high a rate. That happened in the steel industry. Whatever explanation one may give for what went wrong, we know now that the investment in the steel industry during 1959, 1960, and 1961, was far too high.
If the boom is a big one, like that of 1960 and 1961, this over-investment can have extremely serious consequences later, because the manufacturer does not invest to get a better return for the floor space he is using, but uses it to cash in on the boom by manufacturing more of the product he is already producing.
There should be discrimination in favour of steadiness in the application of investment allowances. If there is not steadiness in application, how will the developers and the engineers make their proper contribution towards doing more on the same floor space? Unless we accept it as a principle that we must do more on the same floor space we shall not succeed in marching abreast of the times. Whatever comes afterwards—whether we have to make allowances for redundancy, or bring in programmes to deal with it—something will have to be done once the principle has been accepted that investment for growth really means doing more than was done before on the same floor space.
My hon. Friend the Member for Craigton was right in saying that much of the investment going into British industry in 1960 and 1961 never paid off in terms of profitability. If I were an investor and studied the markets in order to make my living out of Stock Exchange transactions I would avoid the type of firm which made bad investments in 1961, on whatever ground. The Economic Secretary would probably agree with me. Years have passed, but those firms are still saddled with the same sort of machines, bought from makers who were making them to the same pattern in the last boom. Unless we can get out of a continual pattern of boom and trough we shall never succeed in doing what we want to do, namely, to ensure a sustained growth that will carry British industry forward.
If we regard investment merely as shovelling capacity into the factories we are doing no more than the Georgians of the 1920s in digging holes, as my hon. Friend the Member for Ashfield (Mr. Warbey) said, or the Brazilians in burning coffee—simply making way for another type of machine. What we need is a planned idea, with more inquiries being made, and a steady determination to do something about trends. I hope that the Economic Secretary will explain what he meant about the impossibility of predicting. The great weakness of our economy is the lack of consistency in our investment in manufacturing industries. We must review the question of capital allowances, investment allowances, and the like. This is all tied up with the necessity to have courage in predicting what lines our economy will take.
I want to refer to what has already been said about the impossibility of predicting. The hon. Member for Barry (Mr. Gower) asked how it was that the Italian industry could predict in such a way that it is now the biggest exporter of boots and shoes. My answer is that the Italians knew when they started on this process, just as Lord Marks knew that he would be able to sell in the way that he is now doing. Unless we get down to the problem of the future programming of our industries, using the sort of discrimination mentioned by my hon. Friend the Member for Ashfield, we shall never succeed in our endeavours. We must be able to estimate the trends in industry so that we can ally our industries to movements in world commodities, and can cut down production of those manufactures which are either declining or which could be produced better by under-developed countries.
Japan has already decided that in respect of those manufactures of which she has a large share of world trade, but where the demand for those manufactures is declining, investment shall be discouraged.

Sir Cyril Osborne: The hon. Member has quoted two examples of matters with which I have a slight connection, and in both respects he is wrong. He said that the Italian boot industry was planned a long time ahead, and knew that it was going to be able to sell a great deal more. This morning Mr. Charles Clore stated that his experts had


planned to take account of the fact that women would wear square-toed shoes this year, but that those planners had been so wrong that sales and profits were very much down as a consequence. The people in the Midlands who have been making these square-toed shoes have found that planning—

The Temporary Chairman (Mr. John Arbuthnot): Order. The hon. Member is going rather wide of the Amendment.

Mr. Rhodes: The hon. Member has only just entered the Chamber. He has not heard what I have been saying. I will say it again.
The people who knew what they were going to sell were the people who succeeded—just as we knew in the last century what we were going to do. The modern method which is paying off in international trade is that which is adopted by the Japanese. There is discrimination in investment in Japan. They are playing down manufactures which are declining or can be produced by underdeveloped countries.
I ask the Economic Secretary to explain more fully what he meant by the impossibility of being able to predict. If it is impossible to predict there is no hope for our export trade.

Sir C. Osborne: First, I ought to point out that I came into the Chamber specially to listen to the hon. Member for Ashton-under-Lyne (Mr. Rhodes). He said that what industry wanted was long-term planning, in order to know what was going to happen for a good many years ahead. That is what we should all like to know.

Mr. Rhodes: It is not so much that we want to know what is going to happen a long time ahead. We want to know what is going to happen tomorrow, in terms of the expansion of world trade in certain commodities.

Sir C. Osborne: As I said, the hon. Member cited two examples of which I have a little knowledge. He must know that Lord Marks, of Marks and Spencers, is one of our shrewdest and ablest businessmen. I know that that great organisation—shrewd and able as it is, and producing the finest goods at the cheapest prices in this country and probably in the world. and which is able to put its finger on the pulse of world trade week by week

—has not made out a plan for the next 10 years and said, "This is what will happen", because, as the hon. Member knows, all sorts of factors affect trade. It is impossible to plan for 10 years ahead, five years ahead, or even two years ahead, knowing that industrial plans must be altered week by week according to the way in which the market moves at home and abroad. The hon. Gentleman is wrong in saying that long-term planning is practical.
5.30 p.m.
The other point the hon. Gentleman made was that the Italians had planned what they were going to sell, for years ahead. I made a statement in order to refute this and to show the impossibility of long-term planning. This morning Mr. Charles Clore issued a statement that his boot and shoe industry, probably the biggest in the country, had suffered a loss this year because the fashion experts who plan for him, in the same way as the hon. Member wants the Government to plan for the whole of industry, had failed to anticipate what the public would buy.
The only other example I wish to give to the Committee is that of the appointment by the then Socialist Government of the Ridley Commission in 1951. This Commission had to forecast—as the hon. Gentleman wants to forecast—what it thought would be the national requirements for some years ahead of coal, gas and electricity. That is the kind of forecasting and planning upon which hon. Members opposite pin all their hopes. It is supposed to be a panacea, a cure, for all things. Every forecast of the Ridley Commission in 1954 about our future fuel requirements was falsified. To say that planning will cure all economic troubles is just nonsense.

Mr. Rhodes: The hon. Member might have paid me the courtesy of listening to all I had to say, instead of making a speech off the cuff an something about which he knows nothing whatever. It would be just as discourteous for me to walk out of the Chamber while he is speaking.

Sir C. Osborne: I would never dream of being discourteous to the hon. Gentleman, because I have a great respect for him and for his knowledge of industry.
I came into the Chamber when I knew that he was speaking because I thought it was the sensible thing to do.

Mr. Rhodes: Then do not talk nonsense about what I said.

Sir C. Osborne: The hon. Gentleman said, in the hearing of myself and other hon. Members, that industry wanted longer-term planning to know what was going to happen years ahead.

Mr. Rhodes: indicated dissent.

Sir C. Osborne: The hon. Member should look at the OFFICIAL REPORT tomorrow. He must be unaware of what he did say. All I wish to put to him is that planning, especially by civil servants and politicians, is not necessarily the answer to all our problems.

Mr. Cyril Bence: The contribution by the hon. Member for Louth (Sir C. Osborne) showed how dangerous it is to come into this Chamber half way through the speech of another hon. Member and to make an intervention on the strength of the small part of that hon. Member's speech which may have been heard. Had the hon. Member for Louth been in the Chamber when my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) began his speech he would know that a number of times my hon. Friend made the point that we should all like to know how to plan for years ahead, but that industrialists had to plan from day to day or from week to week. The hon. Member for Louth did not hear that and so he did not appreciate what my hon. Friend was talking about, and that was rather unfortunate.
I wish to discuss this Clause from the point of view of the effect of investment allowances on different industries. I am in favour of the provisions in this Clause. But my experience of industry has taught me that where investment is high and is managed competently, everyone works under better conditions and for better wages than in an industry where investment is poor and badly managed. As a trade unionist who has worked for the benefit of people in industry, I wish to see high and competent investment properly managed and administered and a Government fiscal policy which would encourage this.

Captain Walter Elliot: Would the hon. Member also agree that he would like to see bigger profits?

Mr. Bence: I happen to be a member of a trade union which is competent to make its case for higher wages and better conditions when figures are produced to show that the company concerned is making bigger profits.

Captain Elliot: The hon. Member will agree with me?

Mr. Bence: As a trade unionist and a representative of trade unionists, I agree that if the organisation in a factory is efficient and the company is making bigger profits we should share in them.

Captain Elliot: I interrupted the hon. Member on that point because earlier his hon. Friend the Member for Ashfield (Mr. Warbey) was arguing that these investment allowances were in many ways merely methods of increasing profits.

Mr. Bence: That relates to a point which I wish to make about investment allowances being given discriminately. Some engineering enterprises are intensively capitalised and others are labour-intensified. Copper drawing and tube drawing industries are highly capitalised. They are pretty well a monopoly. Hundreds of smaller industries which are labour-intensified depend on the products of the copper and tube drawing industries for copper wire, and for plastics they depend on another section of industry which again is almost a monopoly. To what extent are the advantages from investment allowances given to capital-intensified industries to enable them to make more profits and perhaps to give better conditions to their workers? In what way can we ensure that these advantages are passed to smaller units, such as those which may be assembling copper wire into printed circuits for radio and television, or manufacturing bicycles or parts for motor cars?
In some monopoly conditions it is only the highly capitalised industrial units which get the benefit of the allowances, and I wish to see that benefit spread. This may be possible through low prices. Here we must be frank and appreciate that, where there is little competition and prices are agreed upon, it may be that many manufacturers lower down the scale do not get the benefits which they should receive from industrial allowances.
Not long ago I made it my business to investigate a number of companies—I shall not, of course, give the names—and I came across some businesses, including some big businesses, which had not made a profit for 18 months. They have nothing to write anything against. Any new capital investment they put in—and some are putting in plenty—must be against expectations for the future. At present in Scotland expectations are not too bright. On a very stormy day last week it was said by hon. Members opposite that Scotland had passed the winter and the sun was beginning to shine, but, believe me, the sun is not shining for the shipbuilding firms on the Clyde. If they are not making profits this does not mean a thing to them. There may be plenty of confidence down here in the South, but I am afraid that there is not so much confidence north of the Border.
My hon. Friend the Member for Glasgow, Craigton (Mr. Milian) showed that there is discrimination in this matter. The men in Whitehall do discriminate. Discrimination in regard to investment is a balanced thing. It is balanced as to what is desirable for the community and what is a socially desirable project. For that reason gaming institutions will not enjoy the benefits of this particular Clause. The Board of Trade discriminates through B.O.T.A.C. when making grants to companies going to development districts. There is discrimination about whom they should help. We had discrimination about a company which we hoped would come to Dunbartonshire. The Board of Trade decided that it should get a certain amount and the company would not come because it did not think that was enough.
I am not complaining about discrimination, but we should recognise that it has to be balanced. My hon. Friend referred to frills. As a member of the Temperance Alliance, I always feel a little depressed when I see a distillery or a brewery being erected, but when one was erected in Dunbartonshire I consoled myself by the fact that of the whisky to be produced there 90 per cent. would be sold to the United States.

The Temporary Chairman: The hon. Member seems to be getting a little far from this Clause.

Mr. Bence: I take it that the institution to which I referred will get an investment allowance. Of the whisky, 90 per cent. will be exported and we shall be paid for that in dollars. With those dollars we may buy Spanish oranges and I love them. It is very difficult to decide what is a frill and what is not a frill in a multilateral system of trading. If the goods are going to export, the product might be desirable and good for the British economy although superficially it seems a waste of resources. I think that the distilling and consumption of whisky is a waste, but that is a matter of opinion and has nothing to do with the Finance Bill, except in so far as we discuss Customs and Excise duties.
I welcome the Clause because it will enable us to keep these matters under review and keep in touch with the Monopolies Commission to see that the tremendous advantage given to the tube drawers, copper wire drawers and manufacturers of steel drawn tubes will pass on these benefits and not merely keep the benefit they get from basic manufacture.

5.45 p.m.

Mr. Warbey: I wish to intervene only for a moment to ask one or two questions prompted by the rather doctrinaire assertions of the Economic Secretary in favour of laissez faire and against planning. If the Chancellor considers that private industry in this country has shown itself so enterprising, so vigorous, so patriotic and so concerned with national interest without the arbitrary decisions of the Government, why are we having these investment allowances? Secondly, I ask why are we increasing these allowances?
The Economic Secretary has to make a case for this Clause. These investment allowances were originally introduced in order to stimulate investment. We had this 20 per cent. tax hand-out—that is what it is—in order to stimulate capital investment before a General Election. Why are we having more added today? What has happened to the use of this investment allowance business as an economic regulator to operate in regulating the economy and smoothing out booms and slumps?
We are now told by the Chancellor that this is to be a permanent thing. My next question is what is to happen when the effect of this addition to investment allowances exhausts itself? Are we then


to have another instalment of 10 per cent.? Once industry has got used to the idea that if it invests it can get tax-free profits it will sit back every now and then and wait for some foolish Chancellor to say, Well boys, all right, here is another 10 per cent. on what you have already." Is that the projection which the Chancellor has in mind, or is he leaving that headache to a Labour Chancellor?

Mr. Anthony Crosland: We have had an extremely interesting debate, both on the Amendment and on the Question, "That the Clause stand part of the Bill." It has included a rather personal interpretation of Labour Party policy towards industry from one of my hon. Friends and an exceptionally polemical party speech from the Economic Secretary. I hope that when he replies to this debate he will be rather more constructive than when he spoke before.
I do not know if the hon. Gentleman reads the advertisements published by his party in the newspapers. If he does, he will have observed that the policy of the party opposite is to take "a cool, clear look" at matters. I hope that he will take a cool, clear look at the whole question of investment allowances. I hope that he will not make such heavy weather of the question as he did on the subject of discrimination when he spoke earlier.
It seems that the key to the matter was expressed very clearly by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who pointed out that in their very essence investment allowances must be discriminatory. They are not a tax remission which uniformly aids the profits of all firms and industries. Firms benefit solely to the extent that they spend money on investment. If one can imagine a firm spending nothing on investment that firm would gain nothing whatever. Over the years the present Conservative Government have operated a number of different rates of investment allowances and have discriminated, apparently with no difficulty or danger to their consciences, between plant and machinery on the one hand as opposed to industrial buildings on the other, and special rates for ships, for research and so on.
The principle of discrimination has been embodied in these allowances from the start. Quite apart from that, on the more general point the Economic

Secretary cannot be allowed to put over the over-simplified line that any discrimination is a matter for arbitrary decision by Governments even if it is of a kind which can never be acceptable.
The fact is that in these days even a Conservative Government are so heavily involved with industry that they are bound to discriminate the whole of the time in their taxation policy, in their policy for subsidies, in hire-purchase controls and over the whole range of Purchase Tax. The Government are involved in discrimination between different industries, whatever we may say about investment allowances. One can say, further, that under this Government parts of their financial policy have involved not merely discrimination by the Government themselves between different industries but a deliberate attempt to make outside bodies discriminate between different industries.
For example, when the Capital Issues Committee existed it was instructed by the Government to give, or not to give, loans according to the national importance of different industries and according to how much they contributed to the balance of payments. In the days when Chancellors of the Exchequer used to exchange friendly letters with the chairmen of the banks asking for bank restraint, it was common for Conservative Chancellors to ask the bank chairmen to discriminate, in making advances, according to the national importance of an industry. This principle of discrimination has therefore long been accepted even by Conservative Chancellors of the Exchequer, and the Economic Secretary made unnecessarily heavy weather of it this afternoon.
This is apart from the fact quoted by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that N.E.D.C. has recently accepted the possibility of new kinds of differentiation and has drawn attention to the fact that both the first Tucker Committee and the Radcliffe Commission approved the principle of discriminating between industries.
This is the only occasion each year on which we can look at the principle of investment allowances, and I therefore think it reasonable to ask one or two questions. I should be grateful if


the Economic Secretary would reply to them. One question which we on this side of the Committee have to ask is whether from our point of view investment allowances are an equitable form of tax remission. As my hon. Friend the Member for Craigton pointed out, however we describe them—whether we talk about them as a subsidy to profits, which I do not think is an accurate description, or, more accurately, as a subsidy to investment—the fact is that the investment allowance by itself, or an increase in it such as we are considering under the Clause, means a reduction in the total amount of taxation which is being paid by industry.
There might be conditions in which we on this side of the Committee would be inclined to say that there was no case for reducing the total burden of taxation on profits. But I do not think that we should consider that a sufficient argument in principle against the investment allowances. We could quite easily correct that situation by increasing Profits Tax at the same time as we increased the investment allowances. It would be possible to maintain the total yield of corporate taxation at exactly the same level as before by increasing the investment allowances and at the same time increasing the Profits Tax, thus redistributing the burden of taxation between firms which were investing heavily and firms which were investing lightly. In that way we could dispose of the argument that there is always a danger of too much remission of corporate taxation.
The next question on which I hope the Economic Secretary will comment is how effective these allowances are for their declared purpose of stimulating investment. None of us can possibly know in detail. This is not the sort of thing we can ever calculate. One cannot isolate the effect of these allowances from all other considerations which determine investment decisions. It would be interesting to know whether the Government have a view about this. They have to make precise calculations as to the cost of the increased allowances, and it would be interesting to know their view on the effectiveness of these allowances.
For example, do they share the view often put forward that they influence the decisions of small businesses but have

very little influence on the decisions of large businesses? Certainly in theory they should be an extremely powerful stimulus to investment. Twice at any rate over the last 10 years, both in 1954 and in 1959, either the institution of the allowances or, in the second case, their restitution preceded a very considerable investment boom. But would be interesting to have the Treasury view on the question of how effective they are.
The next question which it seems to me we must ask, and which my hon. Friend the Member for Craigton asked, is this: supposing they are effective, do we need as a permanent feature of our taxation system this almost artificial stimulus to investment? Here I should like to quote the Second Report of the National Economic Development Council. It is a good thing to quote this Report to the Economic Secretary because it may encourage him to reread it. That is a good thing if it encourages him to read the reference to the wealth tax which shows that N.E.D.C. has come out more strongly in favour of it than has my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). I always like to encourage the Economic Secretary to go back to N.E.D.C. Report No. 2.
In paragraph 171 the Report refers to the question whether investment allowances are needed permanently. The Council says:
It is an open question whether special encouragements to investment are needed permanently as a long-term means of sustaining growth…".
I think that that is right, and I think that my hon. Friend the Member for Craigton will also agree that it is right. Let us suppose that we can jerk investment up to the proportion of the national income which seems to be right, and suppose that we can run the economy fairly hard and continuously and in a fairly stable way afterwards it would seem to me to be peculiar that we should need this special additional stimulus to investment. I think that we could then revert to the more normal situation in which people could write off 100 per cent. of the value of the plant but not write off 130 per cent, as they will be able to do under the Clause.
But, despite what we expect would be the long-run position, investment has been allowed to fall so far in recent


months that we need this increase in the allowances in order to jerk it back to the level which most of us would like to see. Nevertheless, from this point of view the Economic Secretary must answer the question: why was this decision delayed until November and not taken in the last Budget? After all, we knew at the time of the last Budget —many of us, including myself, mentioned it in our speeches on the last Budget—that private investment was about to fall. May I quote paragraph 32 of the Economic Report for this year? It reminds us, quite rightly, that a
survey of firms' intentions at the end of 1961 suggested that there might be little change in investment by manufacturing industry between 1961 as a whole and 1962 as a whole.
It added that
since manufacturing investment was rising during most of 1961, this forecast already implied"—
at the end of 1961—
some decline in investment between the beginning and end of 1962.
In this situation, why did the Chancellor's predecessor not take this action then instead of waiting until November? It seems to me an example of extraordinarily inept timing. In view of the point about timing, I think that we all agree that we now need these increased allowances in order to get investment to the level which we want to see.

Sir C. Osborne: Will the hon. Member say a word about the medium-sized industries which are subject to fashion changes and in which new machinery has to be installed continuously because of fashion changes? Does he not agree that they must have greater allowances? Secondly, will he deal with the problem of depreciation allowed only on what is called historic cost when to replace a machine will cost a great deal more than the historic cost?

Mr. Crosland: The argument about historic cost is a hoary old argument which we used to have on the Finance Bill year after year. It takes about half the second Report of the Royal Commission on Taxation. I think that I shall be out of order if I discuss historic costs on the question of investment allowances. It is relevant, perhaps, to the next two Clauses.
The hon. Member asked about firms which are subject to fashion changes. This does not seem to me to be a reason for a permanent need of these provisions. I am not talking about this year or next year, but it does not seem to me to be a reason why they should permanently be able to depreciate more than 100 per cent. of their equipment. Under the new suggestions in the next two Clauses our depreciation allowances are extremely generous by international standards, and it is not quite clear why as a permanent feature of our economy people should be able to write off more than 100 per cent. of what they have spent on their plant.
The last point which I want to make takes up an issue raised earlier from this side of the Committee. I hope that the Government do not regard these allowances as a kind of regulator, because they cannot possibly be a method of correcting fluctuations in investment or in the economy as a whole. They are much too uncertain for that. We do not know precisely what their exact effect will be. None of us can tell precisely. All sorts of other considerations are involved. But, even if they were not so unpredictable in their effect, there must be a time lag between announcing that investment allowances will be raised or lowered and actual investment spending on plant, equipment and buildings.
It seems to me quite wrong to suppose that we can use investment allowances as a kind of regulator to control fluctuations in the economy. Their real function should be to get investment as a permanent, long-term thing, at the sort of level we want. The allowances should ensure that investment stays at that level as a proportion of the national income to the point which the Government think right.
6.0 p.m.
The last N.E.D.C. Report makes an extremely powerful point and pleads for far fewer changes in the allowances and much greater security. After all, we have had changes in 1954, 1956, 1959 and now in 1963—and this is far too often. The N.E.D.C. Report states in paragraph 17:
With frequent variations they"—
that is, the allowances—
lose much of their effect because a business planning its investment cannot be sure what


allowances will be in force when the expenditure is incurred".
It is absolutely essential that we should get a greater degree of security in the future for these allowances than we have had in the past.
My hon. Friends and I are certainly not opposed to the Clause. We believe that the Chancellor was right to do this in November, although we should have done it earlier—perhaps in the last Budget. Since it was not done, however, he was right to take the step, and most of my hon. Friends think that it represents a desirable method of stimulating investment, although we do not necessarily want it for the rest of time as a permanent feature of our taxation system.

Mr. du Cann: As the hon. Member for Grimsby (Mr. Crosland) said, we have had an interesting debate. Apart from the general interest in many of the points that have been raised today—and I will do my best to reply to them—I think that our discussion has been remarkable for two special reasons: first, the hon. Member for Dunbartonshire, East (Mr. Bence) said that he thought that whisky was a waste. He is the first Scotsman I have ever heard say anything of the sort—[An HON. MEMBER: "He is not a Scotsman."] Perhaps that accounts for his remark. Secondly, there was a passage in the speech of the hon. Member for Grimsby which indicated his love-hate relationship with the wealth tax. I appreciate that that hon. Member is most anxious to get off the hook, as it were, in regard to the wealth tax matter, although I do not think that he will be able to do that by consistently quoting the N.E.D.C. Reports.

Mr. Bence: I did not actually say that whisky was a waste. Being a member of the temperance movement, I do not care for the stuff myself. I showed in my remarks the chain of manufacture; how whisky is exported so that we may obtain foreign currency and buy, for example, oranges—of which I am very fond. I did not say that whisky as such was a waste.

Mr. du Cann: I am sure that my right hon. Friend the Chancellor will be grateful for the general welcome that is being given to his proposals in the Clause. These proposals are designed exactly to increase the investment allow-

ances for new plant and machinery, new mining works, building plant and machinery used for scientific research from 20 per cent. to 30 per cent. They are also designed to increase for new industrial buildings, structures, dredging equipment and so on, the rate from 10 per cent. to 15 per cent. The rate for new ships stays the same and I mention these categories because I think that there has been some misunderstanding as to precisely what is involved.
These increases in the investment allowances are part of a substantial scheme of improvements. It is difficult for us to consider the matter wholly in the context of this one scheme, although it is relevant, for there are four proposals in total, the others being increases in the annual allowances for industrial buildings, increases in the annual allowances for plant and machinery and the improvement in the scientific and research allowances. Thus it must be considered as part of a coherent whole.
I have been asked a number of questions on discrimination. This matter was raised by the hon. Member for Glasgow, Craigton (Mr. Malan) in his extremely interesting speech, as well as the hon. Member for Grimsby. The hon. Member for Ashton-under-Lyne (Mr. Rhodes), who always speaks with great knowledge and experience on these matters, also raised this point. I hope that I can clear up the matter to the satisfaction of all hon. Members.
The point seems to be this. Certainly there is discrimination in much that is done. There is discrimination here, particularly regarding ships, as the hon. Member for Craigton pointed out. It is clear that it must be right to endeavour to help certain industries or to lead others in a certain way. The hon. Member for Ashton-under-Lyne suggested certain new criteria which should guide the Government in judging these matters and in providing new discriminations. We shall certainly pay attention to what he suggested because, as he will know, we are thinking about these matters from day to day.
What one might generally call marginal or general discrimination is, I believe, perfectly in order and appropriate. I am admitting what is being done now, for it is endemic in the Clause. In this connection, and replying to the hon.
Member for Ashton-under-Lyne, I meant to indicate earlier—I regret if I did not make myself clear—that while discrimination of that sort is certainly appropriate and we believe it to be right, a total direction of the economy—total control, which seemed implicit in his Amendment—is not, and will not be, accepted by us. I said earlier that I thought that there were severe practical reasons why it would be wrong and why it would involve great difficulty. I hope that I have explained what I had in mind.
My hon. Friend the Member for Louth (Sir C. Osborne), although he got terrible stick from the hon. Member for Ashton-under-Lyne, illustrated the difficulties that controlling any attempt to plan the total economy would bring. I agree with my hon. Friend; and that is really the answer to the questions asked by the hon. Member for Ashfield (Mr. Warbey). I certainly agree with the hon. Member for Ashton-under-Lyne who said, by inference, that such matters as market research and forecasts are of extraordinary importance in deciding which sectors of industry one wishes to help. In fact, any intelligent businessman must run his business in that way, and so must any responsible Government.
I had my leg pulled rather severely by the hon. Member for Grimsby on the subject of my right hon. Friend's timing. He will not expect me to answer that point in detail, although I realise that it was fair to have raised the subject. He might have gone on to make the further point—though I do not blame him for not doing so—that in November my right hon. Friend saw the need and acted. I am sure that it would be the wish of the Committee, certainly of my hon. Friends, to congratulate him strongly and warmly for doing that.
In proposing the increases in investment allowances and the other changes which have been introduced, my right hon. Friend's first concern was for investment in manufacturing industry, which has been declining. As the hon. Member for Ashton-under-Lyne rightly said, manufacturing industry must achieve growth if our whole economy is to flourish. As the hon. Member for Glasgow, Craigton said, everyone agrees that we need a high and sustained level

of private investment. The aim is to create confidence in a policy of sustained and deliberate expansion, and we are of the opinion that a stimulation in investment is a justified requirement of our long-term policy. I am attempting to make this point as clear as I can.
The hon. Member for Craigton, the hon. Member for Grimsby and the hon. Member for Ashton-under-Lyne pointed out that in the past there has been some criticism of the fact that investment and initial allowances have been changed from time to time. This is perfectly true. The whole aim is to endeavour to get a degree of stability in these improved allowances. I cannot, of course, go further today and promise that the present level of capital allowances will be maintained for any specific period. The hon. Member for Grimsby would probably quarrel with me if I attempted to do so. The Government fully recognise and entirely accept that stability in this context is extremely important. "Steadiness" is a good word to use in this context, to quote the hon. Member for Ashton-under-Lyne.

Mr. Mitehison: No stop-and-go here.

Mr. du Cann: The hon. and learned Member is entitled to say that. My right hon. Friend has made it abundantly clear, ab initio, that we were anxious to achieve policies of growth at a rate that could be fully sustained, and we believe that these investment allowances have an important part to play in this regard.

Dr. Jeremy Bray: Can the Economic Secretary say whether he regards the timing of the changes in the investment allowances as a means of regulating the level of investment, or as a means of regulating our total economic activities? If I under-stood my hon. Friend the Member for Grimsby (Mr. Crosland) correctly, he saw the present increase of investment allowances as being aimed at raising investment to a certain level where we would hope to see it maintained indefinitely. Is that the Government's intention, or not?

Mr. du Cann: It must obviously have an effect on both, and it would be our wish that it should have an effect on both. Though it may be early days to assess the matter precisely, I think that we can fairly claim that the effect is


already flowing. Time will show whether all these measures—all four of them—are fully effective, but the present indications are that they are having both effects.
That brings me to the point put by the hon. Member for Grimsby when he asked precisely how effective these allowances are. He said that it is quite impossible to make a precise calculation, and that is quite true, but some answer may be that my right hon. Friend deliberately chose an improvement of the investment allowances as being one of the most effective inducements to investment. A further comment is that an estimate of cost is, again, an imprecise thing at this stage, but may provide a yardstick by which in time, precise measurements can be made. The cost of the investment allowances is estimated at £8 million this year, £52 million next year, and £70 million in a full year. That probably has a bearing on the N.E.D.C. Report.
I should like now to refer to a technical point in relation to the phrase
…expenditure incurred after the 5th November, 1962…
For the avoidance of doubt, I should like to define that phrase. It means, by virtue of Section 330(2) of the Income Tax Act, 1952, sums payable after that date, whenever contracted for. I hope that that may assist in resolving that doubt.

Mr. Millan: Of course, sums payable in, say, the last few months from November for expenditure contracted for long before 5th November, and coming under this Clause, may be all right, but can it really be claimed that the Clause has provided a stimulus to investment in these cases when it comes to paying money for investment already incurred even before 5th November, if that is what the Clause means?

Mr. du Cann: If I may say so, that does not altogether follow. What matters is the future. The hon. Member is quite right in saying that. On the other hand, however, he is putting undue emphasis on what happens in a little period immediately after 5th November. The point is, as I tried to show the hon. Member for Grimsby, that one will see the results as time goes on, but I believe that it is fair to claim that some of these results

are already becoming apparent and I think that they will become increasingly apparent during the course of the summer and autumn—

Mr. John Diamond: We are all most grateful to the Economic Secretary for referring to that point. It has helped to clear up the difficulty, but has not cleared it up completely. As the hon. Gentleman is probably aware, there are some items of investment that are contracted for, shall we say, in two instalments at two different dates. The actual contract might be signed. It might be a piece of investment that has to be taken as a whole in the interests of the industry or business itself but, quite conceivably, the first part is contracted for at a given date, which might be before the relevant date, and the later part contracted for afterwards.
Suppose one has that situation, and the payment is made. It would be interesting to know how the Revenue will treat it. I know that this is a slightly technical point but the hon. Gentleman was good enough to refer to an associated matter, and the more one can clear up these things at the start the more helpful it is for all of us.

Mr. du Cann: As I understand it, and this applies to other Clauses as well, it is the date of payment that is relevant. The hon. Gentleman will, therefore, find that in the case he has in mind, where one payment may have been made before 5th November and another after, the first payment would not qualify, but the second one would. I hope that that deals with that point but, as I say, it is relevant to other Clauses besides this one.
The hon. Member for Craigton suggested that a real problem which we have to face is to make full use of our industrial capacity. I entirely agree with that, and I hope that the hon. Gentleman will see this Clause, at any rate, not only as part of the four measures to which I have drawn attention but as part of the wider policy of the Government to obtain growth at home and to facilitate international trade, which is very much in our minds at the moment, perhaps, with these international conferences that have been going on recently—E.F.T.A., G.A.T.T., and the rest.
I cannot pursue that now, of course, but will merely say that this is one part


of an endeavour to ensure that spare capacity is better used than it has been in the immediate past. Again, I would say that it is our policy and aim to obtain sustained economic growth.
We are, as the House is proud to remember, an old country. That gives us many strengths but it brings problems in its train, and the particular problem that so much of our industry—and, if I dare say it, some of our thinking, also —is perhaps a little out of date. It is vital that we should modernise, and vital, in particular—and this has a bearing on the question asked by the hon. Member for Dunbartonshire, East (Mr. Bence)— that we should re-equip. This Clause is designed to help that process. As such, we are indebted that it would appear to have the Committee's blessing.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 34.—(DOUBLING OF ANNUAL ALLOWANCES FOR INDUSTRIAL BUILDINGS AND FOR DREDGING.)

Question proposed, That the Clause stand part of the Bill.

6.15 p.m.

Mr. Crosland: I just want to ask really one major question on this Clause, particularly in view of the constructive reply we have just had from the Economic Secretary. I feel that on Finance Bills the hon. Gentleman has only two styles. One is the polemical and the other the platitudinous, and he tends to go from one to the other in rather rapid succession. It is nice to be told that we are an old country, and that we are committed to steady expansion, but perhaps we can have too much of a good thing.
What I have to say on this Clause concerns something we have debated before, and that is how the Government justify the discrimination, that will be increased by this Clause, between industrial buildings, which attract the increased allowances, and commercial buildings, which do not. As hon. Members will know, there is a long history to this argument. The first Millard Tucker Committee considered it, and decided that commercial building should

be treated in exactly the same way as industrial building. The matter was again considered by the Royal Commission which, in its final Report, came to the same conclusion. Perhaps I may quote from that Report. It states:
Although these arguments"—
the arguments of the Inland Revenue—
must be taken into account we do not believed that in the long run they can be decisive…We could find no fiscal justification for distinguishing between commercial and industrial buildings and we think both should get the allowance.
That conclusion was arrived at at a time when the allowance was less than it will be under this Clause; in other words, the discrimination between the two types of building is increased as a result of this Clause.
I should like briefly to mention what have been the traditional objections to giving the allowance on commercial buildings. These were quoted in the evidence given by the Board of Inland Revenue to the Royal Commission. The first was:
Commercial buildings Last a very long time; they are not nearly as much subject to obsolescence as factories are.
They may not be as much subject to obsolescence, but I can think of a great number of hotels to which one could quite happily apply the word "obsolescent", and certain types of commercial buildings are certainly obsolescent.
The second was:
Over very long periods they tend to appreciate rather than depreciate in value, so that if allowances were given they would very often have to be withdrawn when a sale took place.
That objection would still stand.
The next point was that at present there is no economic importance in stimulating the construction of commercial buildings. It seems a very crude notion if one lumps commercial buildings together and assumes that all of them are of less economic importance than industrial buildings. I do not think that that is an assumption that could stand up to serious examination. No doubt there are types of commercial buildings which are in some sense of less obvious national economic importance, but there are many types of commercial buildings which are just as important to the country, or indirectly to the balance of payments, as are some factory buildings.
It would be hard to say that a factory producing fireworks, or sweets, which create dental decay, is more important to the country than commercial buildings earning invisible exports and thus saving the balance of payments. It seems extraordinarily crude to make this distinction between commercial and industrial buildings and to say that one is more important than the other.
Other objections are made in the evidence before the Royal Commission, none of which seems to be vital. I am not definitely trying to make a case for including commercial buildings. It may cost something and one might find more valuable use for the money in this year. All I seek is the Government's view of this matter, because their decision to continue the distinction has aroused the criticism of some of their natural supporters. The Economist was particularly acid, saying that it was a matter of surprise that the Chancellor, yielding to certain arguments, had still not done anything for commercial buildings. It ought to cause disquiet on the Treasury Bench that it should be opposed by the Economist. Though it rouses no disquiet in my breast, I should be grateful for an explanation.

Mr. Stanley R. McMaster: I do not intend to go into what the hon. Member for Grimsby (Mr. Crosland) has said at any length, but there are two points on which I should like an answer. These were raised during Second Reading. One is that there has been some anxiety about industrial buildings where there is a mixture of use partly for offices and partly for industrial purposes. The second is that many farmers have objected to this allowance not being extended to farm offices and other such buildings. I should like to have these matters dealt with in the reply by the Government.

The Financial Secretary to the Treasury (Mr. Antony Barber): I should like to deal, first, with the point raised by my hon. Friend the Member for Belfast, East (Mr. McMaster). It is, of course, not easy. without knowing the circumstances of the sort of case that he has in mind, to say, without either holding out false hopes or bringing depression to individuals or companies concerned, what the result would be in any particular case. I would say in all seriousness to my hon.
Friend that if he cares to get in touch with me about any cases which he has in mind I should be glad to look into them.
The hon. Member for Grimsby (Mr. Crosland) raised very fairly a point about the reasons which have prompted the Government, once again, not to include commercial buildings in the annual allowances for capital expenditure with which we are dealing in this Clause. The Clause increases the annual allowance for capital expenditure incurred after 5th November, 1962. in the construction of industrial buildings or structures or on dredging, and it does so from 2 per cent to 4 per cent.
I should like to get one minor point clear by pointing out that the reference to expenditure incurred after 5th November, 1962, in the Clause means, by virtue of the provision in the Income Tax Act, 1952, sums payable after that date, whenever contracted for. In fact, payability, if I may use that awful word, is the criterion, and as these words appear in both of these Clauses the criterion to which I have referred applies to both Clauses.
This change, unlike the one which my hon. Friend dealt with on Clause 33, was not foreshadowed in my right hon. Friend's statement on 5th November last year. The Chancellor then announced a minimum annual allowance of 15 percent. for plant and machinery and has since then announced other improvements in this allowance, all to take effect in respect of expenditure incurred after 5th November last year.
This proposed change for industrial buildings is in some degree a counterpart to those changes which had the effect of reducing very substantially the period over which allowances are given. I think that it is right, and I hope that the Committee will agree, that this change should also have effect for expenditure after 5th November last year, so as to complete a coherent pattern in respect of major types of expenditure incurred by industry.
To get into its proper setting the effect of the Clause, I should remind the Committee that new industrial buildings and structures will qualify for an investment allowance of 15 per cent.—and that follows from a previous Clause—an initial allowance of 5 per cent., which remains unchanged, and an annual allowance now of 4 per cent. Therefore, 24 per cent. of expenditure will be


allowed in the first year, and 4 per cent. in the second and successive years and as a result 100 per cent. of expenditure will be allowed in twenty years, leaving 15 per cent. to come by way of four further annual allowances.
My hon. Friend the Member for Louth (Sir C. Osborne), who, unfortunately, is not now in his place, raised a question on the merits of whether we should proceed by way of historic cost or by way of replacement cost. I would have said to him if he had been here, though I think that it is of general interest to the Committee, that if we take into account the investment allowance of 15 per cent., the initial allowance of 5 per cent., and the first annual allowance of 4 per cent., making a total of 24 per cent., this is in fact based on replacement cost rather than historic cost and I think that the first Millard Tucker Committee came out in favour of the basis of historic cost which is applied to these annual allowances.
At any rate, the effect is to reduce the period of the allowances to twenty-four years in respect of industrial buildings and structures instead of forty-eight years as previously. The effect, including the initial and investment allowances, is to treat the effective life of an industrial building as reduced from fifty years to twenty-five years.
I do not think that I need trouble the Committee with the various types of buildings and structures which will qualify for allowance, because they are all set out in the 1952 Act and are not changed by this Clause, which merely doubles the annual allowance. The hon. Member for Grimsby, however, referred to the controversy, which I know has been going on for a number of years and which hotted up a little before the Budget, as to whether or not my right hon. Friend should have brought commercial buildings generally within the scope of these annual allowances which are limited to industrial buildings and structures, apart from dredging. Certainly the allowance does not run for building or structures used in commerce generally.
I think that the Committee will remember that this exclusion was made as a matter of deliberate policy in 1945 when these allowances were introduced. The reason was that the purpose of these

allowances was to encourage the expansion and modernisation and re-equipment of the premises of productive industry. It was quite right to query this to some extent but, after all, many years have passed since 1945 and it may be in the minds of some that circumstances have also changed.

Mr. Mitchison: I hope that the hon. Gentleman will not close his mind to the arguments which may be adduced if a new Clause about depreciation on commercial buildings in development districts happens to be selected.

6.30 p.m.

Mr. Barber: No, I am not doing that. I am simply trying to follow in general terms the point raised by the hon. Member for Grimsby, who asked whether, in the circumstances of today, there might be a case for extending these allowances to commercial buildings generally. The hon. Gentleman put the matter fairly. He did not express a definite view himself and he did not say whether his party was in favour of such a change, but he suggested that this was an important issue and that it would be right that I should, on behalf of my right hon. Friend, say something about it.
All I add to what I have said on the subject is that, in my view, it is really all a question of priorities. I doubt that the needs of the economy today would justify the cost of an extension of the annual allowances to commerce generally. In saying that, I have in mind the more urgent need to expand our major basic industries.
I agree with the hon. Member for Grimsby when he says that there is something in the argument that to grant annual allowances to commercial buildings would really be of doubtful merit because of the long life of commercial buildings generally and because of their tendency to appreciate in value over the years rather than to depreciate. This is a factor which is relevant in considering whether to provide annual allowances. Also, of course, one must bear in mind that there is already a substantial volume of commercial building which certainly does not suggest that any additional relief is needed in this sector at present on economic grounds.
The hon. Gentleman asked about the cost. If we were to bring commercial


buildings within the scope of Clause 34 on the new rate of annual allowances applied to industrial buildings and structures, that is, 4 per cent., the cost would not be very great at first, but I understand that it would ultimately rise to no less than £145 million a year, which shows that this would be a quite big decision to take.
While I appreciate the concern of those who have been pressing this particular case, I think, if I may say so, that the hon. Member for Grimsby was wise not to say more than that he wished to raise the matter, without committing himself or his hon. Friends.

Mr. J. T. Price: This is not the kind of Clause on which we should be justified in spending a great deal of time. I recognise that, in relation to other matters which we have to discuss, it may be of minor importance, but perhaps am not alone in being a little bewildered by all the expertise with which we have been regaled. I tried to follow the Financial. Secretary with my usual diligence, recognising the courteous and happy way in which the hon. Gentleman always conveys his brief to us, but there are implications of what he has told us which should, I feel be further considered. If I have got the wrong end of the stick no doubt I shall be corrected.
The doubling of the rate will entail a much greater liability in respect of new buildings than is represented by the stark contrast between 2 and 4 per cent. All the buildings which will qualify for the new rate after 5th November, 1962, will be present-cost buildings, perhaps five or six times the cost of the buildings which they have replaced in the development of the companies concerned. In fact, therefore, this is a much more valuable concession than may appear on the surface. I do not know what incentive it is meant to give, but, as I read it, it represents a material improvement in the value of the concessions so far, although, no doubt, it can be justified from the Treasury's point of view.
There are various chartered accountants and professional Members in the House who are interested in the bookkeeping side of this. We have discussed the investment allowances. We have discussed the impact of the 100 per cent. write-off of depreciation in the first year,

plus 30 per cent. which makes 130 per cent. in all. I should be interested to know how the accountants will calculate the new concessions of 4 per cent. when the total investment has been written off in one year as a matter of book-keeping.
These comments of mine may appear irrelevant to the Financial Secretary, but I feel that the Committee is entitled to have some elucidation, because the 4 per cent. allowance on industrial buildings of the type defined in the Clause will represent a far greater liability on the Treasury than the 2 per cent. would because of the vastly increased cost of new buildings.
The Financial Secretary told us that the new rate of 4 per cent. instead of 2 per cent. will cause the allowance to liquidate itself within. I think he said, twenty-four years instead of forty-eight years as previously. As a matter of arithmetic, I suppose that that is right, but it is significant that this period of twenty-four years exactly squares with the period for which the Government have taken a lease on another building in which they are interested, State House, in Holborn, at an annual charge of, if I remember aright, £238,000. I am somewhat intrigued by this. The period of twenty-four years happens to coincide with the period for which the Government are now leasing properties when they decide to lease in preference to buying or building out of the nation's resources.

Mr. Barber: I do not think that I should be wise, Sir Robert, if I were to go into the question of Government leasing of office buildings. Perhaps i may just tell the hon. Gentleman that he is quite right in thinking that the period of allowance as a result of these various improvements will now be twenty-four years instead of forty-eight. This, of course, is the period for the total of the allowances, including the investment allowances. In fact, as a result of these various allowances, 100 per cent. of the expenditure will be allowed in twenty years, leaving 15 per cent. of investment allowance to come by way of a further four annual allowances.
The hon. Gentleman asked me three other questions which I shall try to answer shortly, because I think that it is the wish of the Committee to get on.
In general, my right hon. Friend's purpose in increasing these annual allowances is the same as the purpose for which they were introduced originally, that is, to encourage the extension, modernisation and re-equipment of the premises of productive industry.
The hon. Gentleman asked whether we might be taking on a big liability because, if inflation should remain with us to any extent, the cost of buildings would rise. He will understand that it is extremely difficult to make calculations of what the cost is likely to be. I can only tell him that the best estimate we can make is that, ultimately, the cost of this particular proposal will be in the region of £57 million in a full year.
Finally, the hon. Gentleman referred to what he thought were certain difficulties of accountancy. What we are doing in the Clause is simply to double the allowance. As far as I know, no difficulties of accountancy will arise. I see the hon. Member for Gloucester (Mr. Diamond), who is far better versed in these accountancy matters than I am, nodding. If the hon. Gentleman agrees with that, I hope that that will satisfy the hon. Member for Westhoughton (Mr. J. T. Price).

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 35.—(RATES OF ANNUAL ALLOW ANCES FOR MACHINERY AND PLANT.)

Mr. William Clark: I beg to move, in page 31, line 34, at the end to add:
(12) Any person may, at the end of any accounting year or period, furnish the Inland Revenue with a certificate from an authorised accountant, confirming the amount of turnover to the home market and the amount of turnover to overseas markets.
(13) Total capital allowances computed under this section shall be divided into the same proportions that home sales bear to overseas sales, as certified under the preceding subsection.
(14) That proportion of capital allowances which relates to overseas turnover shall be doubled for the year of assessment of the accounting year or period.
The two main problems which we have in this country are productivity and export. There is a certain amount of slack in the economy. My right hon. Friend the Chancellor of the Exchequer has in this Budget introduced the free

depreciation allowance, but I cannot develop that under this Amendment. That arises under a subsequent Clause. But if it is right to give an incentive to development districts by the free depreciation allowance to encourage industry to go to development areas, this is indicative that capital allowances can be used in a discriminatory way to assist industry.
What can we do for exports? If we can increase productivity by taking up the slack in the development districts by giving a free depreciation allowance, the same sort of medicine should be applied to exports. What I am trying to do by the Amendment is to relate overseas turnover, as a proportion of the total turnover of a business, to the capital allowances due to a firm. May I give a very simple example? If the turnover of a company is £1,000,000 a year, £500,000 of which is in the home market and £500,000 in the overseas market, and if, consequently, it exports 50 per cent. of its total turnover, capital allowances should be computed in the normal way. That capital allowance figure should then be divided in proportion to the turnover. In this hypo pothetical example, it would be £500 for the home market and £500 for the export market.
As my right hon. Friend will, I am sure, appreciate, what I am worried about is not the wording of the Amendment but the spirit of it. I am asking my right hon. Friend to increase the amount of capital allowances given to the export part of a business. In the example which I have given, this would mean an increase from £1,000 a year normally computed to £1,500 a year.
The Government have over the years done a certain amount to help exporters and industry generally. Apart from a reduction in taxation, which, despite what some hon. Members may think, has come about under a Conservative Administration, industry has been helped generally. Not only are there increased capital allowances in this Budget, but there have been others in previous Budgets. There is also the magnificent work done by the Export Credits Guarantee Department to help exporters. I think that it is fair to say that the E.C.G.D. provisions in this country are as good as those available to any of our competitors, wherever they may be in the world.
It should, however, be borne in mind that certain aspects of our economy have hit industry to a certain extent. I take the recent example of the rerating of industry. I do not propose to argue the merits or demerits of the rerating of industry, but here is a built-in subsidy to industry which must have an effect on our competitiveness abroad. There is also the recently introduced fuel tax. On the one hand, the Government have helped industry and exporters, but, on the other, industry and exporters have been penalised.
What I want to do is to give as much incentive to exporters as is possible. I am sure that every hon. Member agrees with this. My right hon. Friend the Chancellor of the Exchequer accepts the spirit of it in the sense that he has set up the Committee under Mr. Gordon Richardson. This Committee will presumably discuss the turnover tax and the tax which is run by France. I find that many people are mixing up Mr. Gordon Richardson and someone who bears a name very similar to his. I think that both these gentlemen ride horses. Gordon Richardson is trying to ride the export horse, but the whole trouble with industry in this country is that, while we are trying to do that, someone else is holding the reins. Someone else is keeping the spurs away from the horse.
6.45 p.m.
I suppose that the excuse will be made that this sort of discriminatory proposal which singles out exporters far an extra allowance is against our international obligations. It is about time that we in this country decided that, if any other country which is competing with us in overseas markets is benefiting from export incentives, whether it be by T.V.A. or some of the blatant subsidies enjoyed by many of our competitors abroad, it is wrong to say to our exporters, "We have to play the game, although these other people do not." If our allies din G.A.T.T. or in any other international organisation do not play the game and have free and fair competition, we must do something with our tax system to give our exporters the same incentive as our competitors.
If the G.A.T.T. excuse is put up that this is discriminatory—and it is indicative of the importance of this subject for this country that the Chancellor of

the Exchequer is listening to this debate —surely one can argue that an increased capital allowance is not a subsidy to exporters. In fact, it is an accelerated allowance. It does not cost the Exchequer any more whether one writes off a piece of equipment over ten years or five years. I should have thought that through G.A.T.T., and particularly since certain talks are going on at the moment, we might point out to our overseas competitors that this is an accelerated allowance and that exporters who may get this allowance are not getting a subsidy.
I apologise for having spoken so long, but this export problem is extremely important. Unless we export, our standard of living cannot be maintained. If our competitors are getting an incentive, then our exporters should get the same incentive. I hope not only that Mr. Gordon Richardson and his Committee will look at this aspect, but that my right hon. Friend, with his ingenious mind, will see whether he can conceive a scheme whereby we can give an incentive to exports without violating any of our international agreements.

Mr. Geoffrey Hirst: I support the suggestion which my hon. Friend the Member for Nottingham, South (Mr. W. Clark) has made. My fairly long and, on the whole, friendly but not entirely painless experience of the Treasury leads me to believe that it may have some difficulty in accepting the Amendment. However, it is the spirit behind it which is important. I do not mind my right hon. Friend the Chancellor of the Exchequer refusing to jump all the hurdles as long as he indicates that he is at least prepared to go into training and to recognise that there is a need to do something in this matter.
I speak as one who has not been easily wedded to any form of export incentive. I was never very much in favour of it in any form. However, after careful study, I am now much more in favour of it, and I am glad that a Committee is going into this matter. I do not blame my right hon. Friend. If there is any complaint about the matter, it is that they have been too long about it. The Government ought to have been even ahead of us on the back benches in realising that we are dealing with a different situation.
My basic reason for supporting the Amendment—I am not in the least


wedded to the words—is to get a principle accepted by the Committee and some recognition of its need implanted in our policy. I do, however, see that in the near future, if the priorities are to be right—and the priority of all priorities is growth in the economy—certain things inevitably follow. One of them is that our export trade must be increased.
It is a question of priority. If we say that to avoid a balance of payments crisis we shall do what we have often had to do before, lower the base of our productivity and our growth, we are going back to a policy which we have already found to be unsatisfactory. Therefore, the priorities must be right. If we are to accept the growth policy as the prime priority, everything has to be done to fit in with that.
The first thing is to avoid, if possible, any consequences of a growth policy through a balance of payments crisis by increasing our export trade. If that is the order of priorities, we have to do some new thinking. Many of the policies that we have had before, excellent and basically successful as they were, will not match up to the present situation and difficulties.
If other people are using certain methods to encourage trade in circumstances not always dissimilar to our own, we cannot afford to be third or even second in that race. I hope that my right hon. and hon. Friends will give this sort of consideration to this Amendment. As I say, I am not the supreme optimist. I have been here far too long to imagine that this Amendment will be accepted—that would be asking rather too much. What we would like in this Committee is to feel, once again—I think that there is an element of support running in this vein and we have already had it in other directions, as my hon. Friend has indicated—that the Government will be somewhat ahead of this sort of committee in this matter.
It is good, I think, to have this committee, long-delayed, as I think it is, in order to refresh our memories, because, although most of the knowledge is fairly well known, what is more important is that the country should see that the priorities will be put right in the context of world trade and competition today.
In putting them right we have to safeguard that policy by ensuring that we have the machinery to achieve it. On those grounds, I give my utmost support to my hon. Friend.

Mr. Gordon Matthews: I, too, want to support the Amendment. I think that it is essential that we should do something effective to help the export trade. There is one small point in which I disagree with my hon. Friend the Member for Nottingham, South (Mr. W. Clark). If a manufacturer disposes of his machinery before it has been fully written off, the fact that the depreciation has been accelerated would end up by the Exchequer paying more. I think that this is desirable as an earnest of the determination of the Exchequer to encourage manufacturers to replace their machinery very frequently so as to keep it completely up to date.

Mr. Barber: The issue raised by this Amendment is one of considerable importance. I shall not concern myself, any more than my hon. Friends have done, with the actual words, but rather with the object of the Amendment and the method referred to in it.
To reach a conclusion on a matter of this kind a number of factors have to be considered. We have to consider the principles which govern the encouragement of United Kingdom exports, the practice of other countries, our international obligations to which the mover of the Amendment referred, the views of British industry and also the equity of the proposals.
The proposals in this Amendment, put quite simply, is to give traders a special Income Tax and Profits Tax relief by reference to their overseas sales. Its avowed object, as my hon. Friend said, is to provide a fiscal incentive to export. That incentive would consist in doubling the amount of the annual allowances due for any year under Clause 35 in so far as the allowances were attributable to overseas sales on a turnover basis.
As I understood it, my hon. Friend's suggestion involves no more than advancing allowances which would, in any event, become due at some time, and for this reason he thought that it was unobjectionable. But one must face up to the fact that the whole object of the Amendment is to provide an incentive to export


by means of improving the taxation position of traders to an extent which would be determined by reference to exports.
I will come back to this point, but I want to deal carefully with what my hon. Friend said to the effect that the method which he was suggesting was not objectionable from the point of view of our international obligations: Many times in the past we have considered the possibility of some change in the system of direct taxation with the object of providing additional incentives to export. In 1960, we considered partial relief from Profits Tax in relation to export turnover, and last year we considered the possibility of allowing traders a reduction from their Income Tax and Profits Tax of 1 per cent. of their export turnover. In both those cases, the Committee decided that it did not approve of the suggestions which had been put forward.
What of this new, and, if I may say so, ingenious idea put forward by a group of my hon. Friends? There are a number of aspects to consider. First, let me deal with the question of our international obligations which we have freely entered into with other countries. Under the G.A.T.T., certain practices are banned, including those banned under the O.E.E.C. Agreement of January, 1955. These included
The remission calculated in relation to ex ports of direct taxes or social welfare charges on industrial or commercial enterprises.
I have the exact words in front of me which appear in the Stockholm Convention, but I think that the Committee will take it from me that the words are somewhat similar to those referred to in the G.A.T.T. and I will not trouble the Committee with the details.
The whole question arises whether this is a remission of direct taxation, the words used in the G.A.T.T., and also in the Stockholm Convention, or whether it is, in the words of my hon. Friend, merely an anticipation or an acceleration of allowances. But as I have said, one cannot avoid the fact that this Amendment is concerned solely with direct taxation. Its purpose is to aid the export of United Kingdom goods and it provides a tax advantage. It certainly runs counter to the whole approach of the

Government in this matter in the international discussions which we have had in recent years.
7.0 p.m.
The policy of Her Majesty's Government has been not to encourage any export subsidies or other artificial incentive, but to work for the elimination of such practices so far as we have found them in force in other countries. I think that all hon. Members will agree that we have pursued that policy with considerable success. Of our main European competitors, Western Germany allowed its export promotion laws to lapse at the end of 1955, and since then it has had no export tax incentive scheme. In France, the scheme for subsidies on exports was brought to an end in 1958.
There remains in France a provision which is somewhat similar to that proposed by my hon. Friend. This was referred to in a debate last year by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). He referred to it as
an arrangement…which, in our view, would not come within the rules in relation to depreciation …".—[OFFICIAL REPORT, 30th May, 1962; Vol 660, c. 1505.]
The French arrangement is ore by which traders who export more than 20 per cent, of their output have a better rate of depreciation for their plant and machinery. In addition to the ordinary rate, they receive a further annual allowance equal to 1½ times the normal rate multiplied by the fraction of export turnover: total turnover. But this extra allowance applies only where the straight line method of depreciation is in force, and it will disappear after 1964, when the reducing balance method of computing capital allowances will become obligatory.

Mr. J. T. Price: Can the hon. Gentleman say a word about the Italian practice?

Mr. Barber: I will deal with Italy in a moment, if the hon. Gentleman will give me a little time.
With this exception, which is soon to disappear, and the unimportant exceptions of the Irish Republic, Finland and Greece, no relief from direct taxes is given by any other European countries to help exporters. I will deal with one


or two minor aspects briefly in a moment, including Italy.
A number of countries offer exporters rebates of direct taxes carried by goods which are exported, and these are unobjectional, like our own rebate of Purchase Tax, so long as the rebate does not exceed the tax payable.
It is also relevant to consider the attitude of industry to the type of proposal put forward by my hon. Friend. There are some individual industrialists who are attracted by the idea of tax advantages and incentives for exports. But the Federation of British Industries has consistently been opposed to direct tax incentives for exports. Its recent working party, under the chairmanship of Sir Archibald Forbes, considered proposals that exports or increased exports should be exempt from Profits Tax or give rise to some remission of taxation.

Mr. W. Clark: Would my hon. Friend make it clear that that report was issued over a year ago? I think he will find that the F.B.I. and industrialists generally are more and more coming round to the point of view that some incentives must be given to exporters.

Mr. Barber: I can only tell my hon. Friend in all honesty—after all, I meet, as I know he does, a considerable number of industrialists and members of the F.B.I.—that I know of no change in attitude and approach on the part of the F.B.I. on this matter. I will not trouble the Committee with the details, but the Forbes Report considered the question of accelerated depreciation for United Kingdom exporters but decided against it. Unless my hon. Friend knows of anything else which the F.B.I. has put out since then—this was an F.B.I. document —I think it fair to assume that the type of proposal which he has put forward would not be looked upon very favourably by the Federation.

Mr. Hirst: I do not think that I have any interest to declare, but I am a member of the Grand Council of the Federation of British Industries and of many of its committees and I am also connected with the Association of British Chambers of Commerce. Although an official document has been issued, and we must pay attention to it, I can assure my hon. Friend that the thinking in both bodies is very different at present.

Mr. Barber: No doubt we shall be hearing about that apart from the hints that we have been given by hon. Gentlemen. But there are other and, I believe, more cogent reasons against the proposal by my hon. Friend the Member for Nottingham, South.
I will not trouble the Committee with the somewhat arbitrary character of the relief which is proposed—it is inherent in it; it is not the fault of my hon. Friend—in the suggestion, except to say that one could not look behind the actual exporter to the manufacturer whose plant and machinery produce the goods. It would provide no relief in respect of invisible exports such as shipping. Furthermore, the trader might be involved in a trade which did not use much plant and machinery. I agree that these considerations, like the attitude of the industry, are relevant, but they are by no means conclusive.
I come to an aspect which I think should carry considerable weight. My hon. Friend the Member for Nottingham, South referred to the attitude of other countries. What is the practice of our principal European competitors in the matter of direct taxation? France has the special depreciation allowance somewhat similar to this to which I have referred, but that is soon to disappear. Italy, to which the hon. Member for Westhoughton (Mr. J. T. Price) referred, has two schemes under which exporters receive rebates of taxation. Both schemes—I have details of them—have been under attack in the Common Market, and the United Kingdom has taken them up with the Italians bilaterally. I have the details if the hon. Member would like me to go into them, but I do not wish to weary the Committee on a comparatively narrow point.

Mr. J. T. Price: The hon. Member has been good enough to reply to my point. I do not wish to prolong the debate, but I should like to point out that I happen to know that the taxation system in Italy is still a hang-over from the corporate State of Mussolini, and tax is paid on the wage bills collectively of all industries—tax ranging from 70 per cent. to 100 per cent.—and large sections of the industry are relieved of this in respect of export performance. Although the hon. Gentleman rightly says that the


system has been under attack, it has persisted for more than twenty years.

Mr. Barber: I do not think that I would go quite as far as the hon. Gentleman has gone. All I can tell him is that the two exceptions in the case of Italy are under attack by the Common Market and that we ourselves have made representations. I want to give the hon. Member the rest of the answer on this point. The rest of the Common Market countries—Germany, Holland, Belgium and Luxembourg—offer no objectionable fiscal incentives for exporters. We have also to consider our E.F.T.A. friends. The position there is that, apart from Finland, our E.F.T.A. neighbours—Norway, Sweden, Switzerland, Denmark, Portugal and Austria—offer no objectionable fiscal incentives to exporters.
At the end of the day one comes to a matter which one must not brush aside, and that is our own self-interest—in other words, what is the broad interest of the United Kingdom? Let hon. Members ignore for a moment our obligations under the G.A.T.T. and to E.F.T.A. I appreciate that my hon. Friend may have a different view about whether or not the proposal falls foul of these obligations. Let hon. Members ignore for a moment what our principal European competitors are doing, and let them ignore the line that we have consistently taken in the past, because that certainly should not bind us in our future policy.
Quite apart from these considerations, would it be in the our own interest to provide for some form of relief from direct taxation, such relief being calculated by reference to export turnover? I doubt whether it would. If such relief proved to be effective—and that is certainly the objective of my hon. Friend—it surely would not be long before it was adopted by our competitors. In other words, the relative tax advantage to the United Kingdom exporter would, I believe, soon be lost.
Furthermore, if we were to introduce a scheme which, certainly in our opinion and in that of many other countries, ran counter to the principles for which we have so successfully worked in the past, some of our competitors would inevitably start to devise even bigger and better tax incentives for their own exporters, and I think that at the end of the day we should regret the initiative that we had

taken. Surely the paramount consideration for our exporting industries must be to remain competitive. That will depend largely on the trend of our costs. I believe that it is on improved productivity and on a responsible and equitable approach to incomes that we must concentrate.
These are the factors which, in the main, will determine our success or failure. I am sure that the Committee is grateful to my hon. Friend for raising a matter of such importance as the question of tax relief to exporters. We have touched upon this matter in almost every debate on the Finance Acts which I can remember. Although this debate has been short, we are grateful for the opportunity to discuss the most important principles behind the Amendment. But in the light of what I have said—I hope that I have been frank and fair—I trust that my hon. Friend will not seek to press the Amendment.

Mr. Diamond: I echo the words of the Financial Secretary in expressing appreciation to the hon. Member for Nottingham, South (Mr. W. Clark) for providing this opportunity to discuss a matter which usually comes up each year. He introduced it in a way that, although the wording may not be quite all right, has allowed practical and worthy consideration. Having said that, however, I am bound to say to the hon. Member and his hon. Friends that, tempting though it always is for the Opposition to support at least six hon. Members opposite who clearly intend to vote against the Government, we must resist the temptation to support them and bring the Government down on this issue.
We take the view that the whole question of failure to achieve adequate and satisfactory targets for exports is part and parcel of the failure of the Government's economic policy which we have criticised on many occasions. This may be the appropriate time for a full-scale economic debate, and one can say that the failure is not, therefore, a matter which can be remedied purely by an alteration to the Finance Bill in order to give what amounts to a small fiscal incentive which, however one looked at it, would be somewhat unsatisfactory.
The Government take the view that the Amendment would be against our international obligations, and I agree. I


am sure that if the hon. Member and his hon. Friends were also satisfied that this were so, they would wish to withdraw the Amendment. But it is unimportant whether this falls clearly within or without our international obligations. Even outside them, it would immediately evoke the last thing we want—a retaliatory tit-for-tat war whereby when we did one thing another Government did something else in retaliation. That would not help us.
The fact is that the rates of exports of Continental countries by and large are going up faster than ours. We have to meet them on their own ground. Perhaps one of the greatest arguments against any kind of pure fiscal inducement to exporting would be that it would divert attention from the main problem. It would be wholly wrong to think that giving a small incentive of this kind would mean that we could sit back and that everything would be all right. One only has to look at the way exports are growing faster on the Continent than here. Compare the figures of 10 years ago with the figures of today, and one will see that it is ludicrous to suggest that an explanation can be found in our comparative fiscal systems.
The explanation is to be found in a wholly different direction—the national attitudes towards exports. Every German manufacturer thinks first of exporting and secondly of the home market. British manufacturers, by and large, think first of the home market and only to a limited degree, and when considerably pushed, of exporting after that. One only has to bring German and British counterparts together for discussion to realise their different attitudes.
The British investor invests on the basis of satisfying the home market. The Continental investor invests on the basis of satisfying the home market plus some other market even if he does not know where he is to find it. A manufacturer there will produce not only for the home market but with exporting in the forefront of his mind.

Sir Peter Roberts: The hon. Gentleman is making an over-exaggerated case. I ask him to reconsider his sweeping statement about British industry.

Mr. Diamond: I said "by and large" That is fairly sweeping, and I appreciate what the hon. Gentleman says. I am most anxious not to use words which are not justified, but one has to take note of the facts, particularly as an Opposition, and the fact is that our performance in terms of export statistics—I am putting this as neutrally as possible—over the past 10 years has been very unsatisfactory indeed.
7.15 p.m.
What we are attending to now is how to improve the situation. It is no use running away from the facts and from the need to export. We must put our minds to exporting much more than we do, and it is no use seeking consolation in some minor fiscal adjustment. That would be doing less than our duty to the nation.
We have a duty to see to it that people more and more realise the need for exporting more and more, and that it must be done in terms of more production, better salesmanship—including, for instance, the ability to discuss a sale with a buyer in his own language—and competitiveness in quality and in price. We are competitive in price at the moment. But this very fact should indicate that other qualities are lacking if the most important one of price is by and large on our side at present and still our exporting is not good enough.
It is because it would, to a certain extent, divert attention from these all-important issues to a very much narrower point about fiscal inducements that I do not think one could be in favour of this Amendment unless very strong other arguments supported it. But the arguments so far are all the other way. First, this Amendment would be against our international obligations and, secondly, even if it were not, it would start retaliatory action.
As the Financial Secretary has said, this would be bound to cause dissatisfaction to all those in business who make an almost equal contribution but not such a direct contribution to exports. They could not be helped by this proposal because they would not have any direct turnover to overseas markets. It is not only those who have a turnover to overseas markets direct who help our exports. This proposal would have to go a great deal further. The Amendment is actually


far too narrow purely from the point of view of helping anyone to improve our exports. I hope that the hon. Member will not press it.

Mr. Hirst: I realise that my hon. Friend the Member for Nottingham, South (Mr. W. Clark) will not want to press the Amendment but I want to answer one thing said by the hon. Member for Gloucester (Mr. Diamond). I get a little tired of this claim about retaliation. It seems that everything we do is subject to retaliation, but it should be remembered that other people do these things and it is absurd to suggest that we alone should never do anything to help our own people because something will happen in retaliation.
The fact is that we would not be leaders but only followers by giving our traders facilities which others in the world already have. The Government take a "holier than thou" attitude. Although, of course, my hon. Friend the Financial Secretary dealt with this subject pleasantly and lucidly, he made more or less the same speech I have heard on every occasion during the last two or three years. The only difference is that it is now a little more polished.
I do not see why we should always be cast in this role of showing to the world that we are determined to remain a virgin even if we live in a harem. I get rather tired of this argument and I feel that suggestions should not be ruled out on that ground. That is not an argument which should impress the Committee very much.
Whatever the demands that we should appreciate the needs of the economy, it is inevitable in commerce that there should be some form of fiscal incentive. If we are to get our priorities right, and I sincerely believe that the Government firmly intend to do so and I absolutely accept the Chancellor's policy in this respect, we have to think again. I am bitterly depressed in the light of that and in the light of the change of policy which the Financial Secretary announced —and there is no doubt that there is a change—that we are getting the same excuses for not taking action and that our traders at all times have to be at a disadvantage compared with traders in the rest of the world.

Mr. Barber: In view of what was said by the hon. Member for Gloucester (Mr. Diamond) about the extent to which British exporters try—and he thought that they should try harder and certainly some of them should—and tying that up with what my hon. Friend the Member for Shipley (Mr. Hirst) said about harems, perhaps I ought to tell the Committee that the other day I heard of a British exporter who had obviously tried very hard. As the result of his visit to Teheran, I am told, every harem in Teheran now has a British juke box.

Mr. Hirst: Somebody was not a virgin.

Sir Henry d'Avigdor-Goldsmid: I had not intended to intervene in this debate, but when I heard my hon. Friend the Financial Secretary say with some unction that he remembered similar debates over the last few years I felt that we ought to remind him that these debates spring from one sole cause —the general feeling in the country that something should be done about fiscal incentives for exporters.

Mr. Barber: I think that my hon. Friend misunderstood me. The only reason I referred to what happened last year and the previous year was to contrast the proposal of my hon. Friend the Member for Nottingham, South (Mr. W. Clark), which, I said, was a new and ingenious proposal, with what had been proposed in previous debates.

Sir H. D. d'Ayigdor-Goldsmid: I am sure that the suggestion of my hon. Friend the Member for Nottingham, South (Mr. W. Clark) is extremely ingenious. If it had been on the same lines as the proposals of last year, it might not have been selected for debate, so it seems a useful peg for this debate, which is liable to be annual.
The hon. Member for Gloucester (Mr. Diamond) said that we had had a poor export performance over the last eleven years. The reason for that is obvious, but it is not one which he will accept. Our competitors went flat out for exports and gave the most extraordinary fiscal incentives to their exporters. I do not want to bore the Committee, but I know what the French Government did in this connection and the enormous premiums which it paid for the foreign exchange which its exporters earned. Naturally, in


those years the French stole a large part of our markets and, having got into those markets, they have been able to remain there to a large extent.
My hon. Friend the Financial Secretary said that the French advantages to exporters were coining to an end. I am interested to hear that, because that was not the case last year or the year before. The French incentives have been in existence since the war, so that at a time when it was against the rulings of the G.A.T.T. for us to do anything about helping our exporters, it was apparently not against the rulings of the G.A.T.T. for the French to take this sort of action.
Those are simply the facts of life. I apologise for boring the Committee with the facts of life, but they have to be considered and we cannot shut our eyes to them. We are not living in a happy mercantilised age. It is too late to go back to Adam Smith. We have to fight this one and fight in a reasonable but determined way. I remind my hon. Friend the Financial Secretary that when he refers to the Forbes Report he should remember that it was brought out in the confident expectation that we were about to join the Common Market. That influenced thinking, if not directly, then certainly in the undertones.
For those reasons, I ask my hon. Friend to consider 1963 as a new year and not the same as 1962, 1961 and 1960. I believe that he was at the Box replying to these debates in all those years. His charm and agreeableness have been inherited from his colleagues who replied before him. But we are now facing a new situation which cannot be dismissed simply with arguments which might have been highly applicable when we were on the point of joining the Common Market, or when we were a great mercantile Power seeking only wider and ever wider expansion of free trade. That is not the case today.
Although the Amendment clearly does not meet the case, I hope that, on consideration, at a later stage, my hon. Friend will revise his reply. After all, when Mr. Gordon Richardson reports, my hon. Friend may have to do something quite different—we do not know—and I would not like to think that we

will have to live with my hon. Friend's reply for a very long time.

Mr. J. T. Price: I hesitate to prolong the debate, but while I largely agree with the general observations of my hon. Friend the Member for Gloucester (Mr. Diamond), there are one or two footnotes which I feel constrained to add to what he said.
The first is that while as a matter of temperament and inclination I am disposed at all times to honour any agreement I enter into, whether personal, collective, or, as a British citizen, made by my own Government with some other country, I like to think that those agreements are being honoured by the other parties as well. The whole basis of confidence between individuals and all relationships in international activities is that it is unfair that some of the parties to agreements should not honour them. I am all in favour of the liberalisation of trade, to which the Financial Secretary referred, and I am all in favour of such adjustments in the G.A.T.T. as now appear to be in the course of negotiations at Geneva.
It is all right to have rules in a club to which one belongs, whether it is a social, sports or political club. But we like to think that the rules apply equally to all members of the club. Unfortunately, in so many international relationships the clubs to which we belong have no effective way of enforcing the rules, and some of the abuses which the Financial Secretary has admitted have been causing a good deal of anxiety.
Until we can get a responsible and reliable referee who will impartially decide and bring about peace and amity among the nations, we are in the situation of having no redress, because there are no sanctions to ensure that our share of the bargain is granted. Do not let any hon. Member believe that I am in favour of breaking agreements. On the contrary, I am all in favour of honouring agreements to the letter, but I want agreements to be honoured by both sides.
We are all interested in encouraging a great expansion of our export trade which is so rapidly falling behind that of other nations. We all pay lip-service to it and in the House of Commons we quarrel not so much about the desirability of having a greater expansion of our


exports as about the methods of bringing that about. The hon. Member for Nottingham, South (Mr. W. Clark) has made a proposal to encourage the export trade. The Financial Secretary drove through it with a horse and cart in the usual way of those briefed by the Treasury. He did it in a most genial manner. We complain not of his manner, but of the substance of his remarks.
The hon. Gentleman said that if we took certain steps we should face retaliation, but I ask him to consider the implications of that remark. Unfortunately, we are now engaged in the arms race. Is it suggested that the Minister of Defence might say that we must sink all our battleships and abandon all our weapons and Armed Forces because, if we go on building them, someone will retaliate?
7.30 p.m.
We must have these fiscal defences for the trade of the country, in the same way as we have physical defences. I would be the happiest man in the Committee if we could slow down the terrible arms race, but we do not abandon our armaments and defences, for the simple reason that the other fellow will not abandon his. I do not think that there is a great deal in the argument that if we do certain things people will retaliate. If we are not getting a fair deal under international agreements, I would like to see those agreements renegotiated so that we get a fairer crack of the whip, or, alternatively, to take action to see that we get a fairer deal.

Mr. W. Clark: I am sure that everyone agrees that this debate has been worth while. The Amendment was tabled in this way simply to have the subject ventilated. I place great reliance on the findings of Mr. Richardson. We hope that it will not be long before they are made available, and that by the time the next Budget is brought in there will be no necessity for back bench Members on this side of the Committee to table Amendments similar to this one. We are nearly running out of our ingenuity in getting Amendments of this kind through the rules of order. I hope that Mr. Richardson will produce something fairly soon, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill.

Mr. Crosland: I hope that I shall not be accused of wasting the time of the Committee, but I do not think that this Clause ought to go through with no debate on the major principle of the thing. This is a very important Clause. It increases, or rather accelerates, annual allowances to a very striking level indeed, and I think it requires a little comment, though certainly all I shall do is to ask the Financial Secretary one or two questions.
The hon. Gentleman may not be able to answer my first question on the spot, but perhaps he can give an answer at a later stage. After this rather striking acceleration of the annual allowances, can he give one or two figures to confirm the Chancellor's claim during his Budget speech, which I do not doubt, that allowances are now as generous as, or more generous than, those in almost any other major industrial country? Any international comparison with the new allowances would be extremely interesting.
My second question is to ask how on earth the Treasury calculates the likely cost of a concession of this kind? It is calculated that this acceleration of the annual allowances will cost £65 million in a full year. One wonders how the Treasury can calculate a figure like that. The fact is that none of us has any idea whether this kind of change in the annual allowances has an appreciable effect on investment decisions. There is no information by which one can judge what the effect of this change will be, and one would be curious to know how the Treasury statisticians come up with a precise figure of £65 million in a full year.
The reason why one is doubtful whether the figure can be very large, and whether this kind of acceleration of the allowances has any significant effect is, as the hon. Member for Nottingham, South (Mr. W. Clark) pointed out when moving the Amendment, that this kind of concession is not a permanent one. This is not in the category of investment allowances which have a powerful effect because they are a direct subsidy. In this case we are talking about money being paid out more quickly and which will come back later; and what the firm gains


from this kind of acceleration is that it has simply a large revolving loan, or the use of more tax-free credit than it would otherwise receive.
If businessmen are rational—which I agree is a rather major assumption to make—this kind of concession should not have any significant influence on investment decisions. There may be a psychological effect, one does not know, but if a businessman acts purely rationally when he makes investment decisions, this kind of concession, unlike the investment allowances, is trivial, and I am surprised that the cost of this should be as high as it appears to be. The cost over a number of years will be zero, because the whole thing comes back in the end. It is simply a transfer between different years.
The other question is the one raised by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), whether, now that we have these generous annual allowances—much more generous than they were a few years ago—there is a sufficient case for maintaining the initial allowances as a completely separate thing. Initial allowances came in at a time when we had no investment allowances, and when annual allowances were very much less favourable than they are now, and with other changes, one wonders whether we need to go on with three separate allowances—investment allowances, initial allowances, and annual allowances. I should like a comment on that.
It is extraordinary how many people, both in industry and amongst the economists and accountants, would like a situation in which the firm decides on its rate of depreciation—in other words, a system of free depreciation not merely in the development districts but all over the country. I am struck by the number of informed people who think that the most sensible way of dealing with this allowance is to allow the businessman to choose the number of years over which he will depreciate his machinery.
The businessman will be able to do this in development districts, and the question is whether this would be an intelligent system for the whole country. The Chancellor mentioned this in his Budget speech, and said that the argument against it was that the cost would be prohibitive, but he did not go into any detail. It is hard to see how the

cost would be prohibitive when, in a sense, the cost is not real but is merely transferring things from one year to another. Given the volume of informed support for this method of depreciation, I should be grateful if we could have a word on this subject. We on this side of the Committee very much welcome the allowances, which I imagine are now amongst the most generous in the world.

Mr. A. P. Costain: On the Second Reading of the Finance Bill I raised a technical point on this Clause. Having declared my interest, I welcomed the Clause. My hon. Friend said that if I wrote giving him details he would reply, and I should like to express my appreciation to my hon. Friend for keeping his promise.
My first point was how, when purchasing second-hand plant, one could ascertain the date of original purchase, because obviously this would have a bearing on the initial allowances. My second point, which has been partly dealt with by my hon. Friend the Economic Secretary, and also by my hon. Friend the Financial Secretary, concerns plant which is being built and paid for over a period. The point has been made clear from earlier Clauses that the date when the amount is payable will be applicable for tax purposes, but there is a little confusion in this in that we are to have one piece of plant, say a digger or a dredger, on which 10 per cent. has been paid and 90 per cent. will rank for other allowances, but in a procedure of this sort there is generally retention money, so there will be the extraordinary situation that upon each piece of plant there will be literally three depreciation rates.
1 hope that my hon. Friend can clear up this point, otherwise our accountants will have a lot of homework to do to provide the right answer for the Treasury. With those few comments, I support the Clause.

Mr. Millan: One does not wish to complain in any way about this Clause because it does something which a number of us have pressed the Government to do before. It both rationalises the rates of depreciation to some extent, and accelerates the period of write-off, but I wish to raise one or two points about this.
First, I agree with my hon. Friend the Member for Grimsby (Mr. Crosland) that, in view of the very much more generous annual allowances, there is a case for looking again at the initial allowances. It would be a satisfactory method of cushioning the impact of this if the Government were simultaneously to abolish or reduce the initial allowances.
My second point also follows from what my hon. Friend the Member for Grimsby said about free depreciation. I want to add one word to that. The case for allowing firms free depreciation used to rest not on the kind of free depreciation which is now to be allowed in development districts under a subsequent Clause, because that is completely unrelated to what firms actually do in their own accounts. Previously the strongest case for free depreciation for individual firms—and the Chancellor has not taken up this point in his references to the subject—was to allow them to write off either what they were allowed under the general arrangements under the Income Tax Acts or, as an alternative, the sums that they were writing off in their own accounts the principle being that this would give encouragement to those firms which, as a matter of individual policy, wrote off their capital expenditure more quickly than did industry generally.
Under the Clause the new allowances will be very much more generous than the actual accounts practice of the majority of firms in British industry. The Income Tax allowances are now to run well ahead of their accounts practice. If we want to encourage people to think in terms of a shorter life for their capital assets, and to encourage them to replace plant more quickly, we must provide some incentive to those firms which write off more quickly than the others.
The trouble with this sort of provision —welcome as it is—is that it gives an advantage to everyone, and gives a bigger advantage to those firms with a conservative rather than a generous depreciation policy. I welcome the rationalisation that is being introduced, but I would have preferred the Chancellor to consider the question of free depreciation for individual firms, tying those free depreciation provisions to what firms wrote off in their commercial accounts. This

is standard practice in a number of other countries, such as Sweden. I believe that that is a more pertinent approach, although it is a question of balance.
The Clause contains extremely generous depreciation provisions, and I hope that we shall take every opportunity to remind British businessmen of this fact. I get rather irritated at their complaining about the way in which our taxation system affects capital expenditure. Even without the improvements in this Finance Bill British industry, on the whole, is fairly well treated in the matter of capital expenditure. It is now to be very generously treated. I hope that it appreciates the fact, and that the rather carping criticism that we have been accustomed to hearing from company chairmen will now be heard rather less often. This is a convenient opportunity to make the point that businessmen are now given substantial opportunities. It is to be hoped that they will take advantage of them.

7.45 p.m.

Mr. du Cann: Once again, we have had a most interesting and valuable short debate on the Clause. I will do my best to answer the questions that have been put to me.
First, I can tell my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) that, in general, when the rate of investment allowances has been changed in the past there has been little practical difficulty, and we do not envisage practical difficulty to any substantial extent in this case. I am not saying that there will be none; I merely say that we do not expect a lot. Inevitably, when any change is made a line has to be drawn, and that creates certain difficulties. That simply cannot be helped.
The precise answer to the specific question that he asked, of which he was good enough to give me some notice—and I apologise to the hon. Member for Gloucester (Mr. Diamond) for not getting it right when I replied to him earlier—is simply that the sums payable after 5th November, 1962, would qualify for the better rates under the Clause, whereas the sums payable on or before 5th November would not so qualify. It exactly parallels the position in relation to the earlier Clause. The reason why I got it slightly


wrong in my reply to the hon. Member for Gloucester was that I was trying to do two things at once. I was trying to be platitudinous and was trying to read my note as I did so—and I made a mess of both.
I want to answer the other questions in part by reference to the object of the changes which we are intending to effect. The object is, first, to provide an incentive to modernisation—as the hon. Member for Glasgow, Craigton (Mr. Milian) mentioned—and, secondly, to simplify the system by substituting a few simple rates for the present complicated arrangements. I am obliged for the understanding that, in general, the Clause meets with the approval of the Committee.
The hon. Member for Grimsby (Mr. Crosland) asked specifically whether I could quote the figures for other countries. I cannot do so "off the cuff"—once bitten, twice shy, as he will understand—but I will happily and willingly write to him at the conclusion of the debate and set out precisely the information that I have. If I can amplify it in any way I shall be delighted to do so.
The hon. Member also asked how the calculation of cost is made. It is estimated to be £3 million this year, £23 million in 1964–65, and £65 million in a full year, as he said. It is based on a projection of the present rate of investment. It is, therefore, patently an estimate. It is the most reasonable figure we can get in the circumstances but, as I admitted when I answered an earlier point of his on another Clause, the true effect of these provisions will be seen in the extent to which this cost increases, and is either less than or more than the quoted figure.
The hon. Member for Grimsby and the hon. Member for Craigton said a good deal about free depreciation. I admit that this is a most attractive idea. In this country it is an entirely new experiment, in the development districts, and it will be most interesting to see how it works out. It is right to point to the experience of Sweden, not that I am familiar with that experience in detail, except that I remember observing a report on the subject in the Economist.
The hon. Member for Grimsby "pulled our legs" very hard about the Economist.

I would have been astonished if I found the Economist agreeing with everything that any Government did. My difficulty lies in finding out what it thinks should be done. Perhaps the hon. Gentleman does not have the same difficulty, but I believe that a lot of other people do, yet we still read it. But I seem to remember an article in the Economist to the effect that a system of free depreciation over the whole country had been found far too expensive to be maintained in Sweden.
It was because we were nervous about the cost, and wanted particularly to help the development districts, that we introduced this revolutionary principle simply for those districts. The hon. Member for Grimsby and the hon. Member for Craigton, went on to make the suggestion that we should not consider ourselves wedded for all time to the present system of allowances. Their views in that respect certainly command the attention which they will undoubtedly receive—especially the suggestion of the hon. Member for Craigton that some companies wrote off the cost of their machinery quickly and were keen to replace, while others were not so efficient, competent or forward-looking.
Those were wise words. I hope that they will have wide publicity, especially through the accountancy profession, to whom many commercial people rightly look for guidance in these matters. There is no excuse for not modernising. The hon. Member is quite right to make that point. This is one of the objects of the Clause, and I am glad to think that it apparently has the blessing of the Committee.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause—36.—(SCIENTIFIC RESEARCH ALLOWANCES.)

Mr. Donald Wade: I beg to move, in page 32, line 16, at the end to insert:
(2) The said section 336 as amended by the foregoing subsection shall have effect as if any expenditure on scientific research were deemed to include any expenditure on pilot plants for the application of such research.
The object of the Clause, as I understand it, is to encourage scientific research and I fully approve. The purpose of the


Amendment is to extend the provisions of the Clause to cover the application of research by expenditure on pilot plant. If suggestions are forthcoming about improvements in the wording of the Amendment I shall, of course, welcome them. But I think that the object is clear. I wish to cover the necessary expenditure in trying out discoveries and to ensure that these allowances are available for expenditure in putting ideas to a practical test with a view to production.
The material words are in the first subsection and the amount which it is necessary for me to read is small:
In the case of expenditure incurred after the 5th November, 1962, an allowance under section 336 of the Act of 1952 (allowances for capital expenditure on scientific research) shall be made by allowing in the first of the five yearn of assessment mentioned in that section a deduction equal to the whole of the expenditure instead of by allowing in that year a deduction equal to three-fifths of the expenditure and in each of the remaining four years a deduction equal to one-tenth of the expenditure…
The problem is: what is capital expenditure on scientific research? If it covers what I have in mind I shall, of course, be content. But I am not sure whether it does. To refresh my memory I studied the Income Tax Act, 1952, of which the relevant Sections are Sections 336 and 340. The material words are these:
…subject to the provisions of the next following section, where, after the appointed day, a person…

(a) while carrying on a trade, incurs expenditure of a capital nature on scientific research related to that trade and directly undertaken by him or on his behalf; or
(b) incurs expenditure of a capital nature on scientific research directly undertaken by him or on his behalf and thereafter sets up and commences a trade connected with that research, a deduction "—

is to be made.
Then the Section continues to set out the nature of the concessions. The material word is, "expenditure", so that one has to turn to the definition Section to ascertain the meaning of expenditure on "scientific research". I learn that "scientific research"
means any activities in the fields of natural or applied science for the extension of knowledge;
That seems to have a somewhat limited meaning.
But the crux of the problem is: what is scientific research expenditure? I find this very enlightening sentence in the definition Section:
'scientific research expenditure' means expenditure incurred on scientific research ".

Mr. Mitchison: Hear, hear.

Mr. Wade: The only other wording I can find which throws some light on it is that
references to expenditure…include all expenditure incurred for the prosecution of, or the provision of facilities for the prosecution of, scientific research".
I am still inclined to the view that the object I have in mind is not covered. But, of course, I hope that I shall be told that I have no need to worry and that the expenditure I have in mind is already covered by the provisions in the 1952 Act.
I think that the second stage is important, the stage in which one builds the pilot plant, or whatever it may be, view a view to production. I wish to make a few general observations on the whole subject. We have to admit that export growth has been retarded by some technical backwardness and that Britain has not only been lagging behind in many aspects of scientific research, but has failed to make a practical application or large-scale production in many of the fundamental discoveries made in this country.
Examples could be quoted where the basic research has been carried out in this country but the initial large-scale production has been carried out by American companies. Penicillin, silicones, fluorescent lighting and computers are examples. That is a very wide range. But we must admit that we in Britain have been losing our share of the world markets for manufactured goods. Since 1952, the British share has fallen from 21·5 per cent. to 15·6 per cent. in the first quarter of this year.
I do not propose to take up the time of the Committee with a great many quotations, but I should like to quote from Professor Barna in The Times of 4th April, 1963:
The products which show the fastest rate of growth in international trade…are, of course, the most recently developed and technically the most advanced products of industry. The inferior trading position of Britain is thus an indication of technical backwardness While cost elements, such as the level of


wages, are important for the older type of product (e.g., ships or locomotives) trade in the newer types tends to be influenced largely by availability.
Putting that into other words it means the initial production based on research work.
It is a little difficult to make international comparisons, but the National Institute for Economic and Social Research, pointed out in 1962, in the May issue of the Economic Review, that after adjusting the exchange rate to get a comparison which is, as near as possible, in real terms, it seems that American industry's research and development expenditure is over five times as large as British industry's as an absolute figure, and that it is nearly three times as large per employee, and twice as large in percentage of net output.

Mr. Ellis Smith: What is the date?

Mr. Wade: It is the Economic Review of May, 1962.
We cannot feel very happy about that state of affairs. Separate comparisons are not made for research and development, unfortunately. But there can be little doubt that international comparison on development alone would be even more disadvantageous to this country.
Of course, there is difficulty in competing with large-scale industry in America and I recognise it. For that reason, I think that greater use should be made of research associations. The income of research associations is comparatively small, and I should have thought that more should be done to encourage research which would indirectly benefit the research associations. Undoubtedly, a joint effort is required in research and development if this country is to equal the large-scale research and development possible in countries like America and Russia, and now the Common Market. Those are the general observations which I felt it necessary to make.
8.0 p.m.
Coming back to the Amendment, I realise that there is some difficulty in arriving at precise and suitable definitions. If I have erred it is in making the wording of my Amendment rather too narrow. Perhaps I could have gone

rather wider, but the aim is clear and important. It is fashionable to quote from the latest Report of the N.E.D.C. I quote one sentence, from page 2:
It is important that the United Kingdom should be in the van of scientific and technical advance in relation both to new projects and to the application of new processes to existing projects.
The gist of my Amendment is to ensure that plant which is required to carry out innovations should have the same capital allowance as pure research, that is, as the extension of knowledge. Of course, that would not solve all our problems. It would not solve the problem of personnel—we need more technicians and more scientists and a case can be made for more people of technical experience on boards of management—but I think that it would help to encourage innovation and new ideas which are essential if Britain is to keep abreast of the times.

Mr. Eric Lubbock: At the risk of incurring the displeasure of the Sunday Express, I wish to add a few words in support of the Amendment moved by my hon. Friend the Member for Huddersfield, West (Mr. Wade) because I think the benefits of increased expenditure on research are absolutely undoubted.
When we had a debate on science and industry in July last year every hon. Member who spoke drew attention to the valuable work of the D.S.I.R. and the research associations. The Parliamentary Secretary for Science gave us an estimate which had been made of the financial benefits to firms taking part in this research work. He said that Dr. Hill had estimated that industry each year got a return of £100 million from the £8 million it spent with the research associations. Although he did not give that estimate his own endorsement, the Parliamentary Secretary said that he was convinced that the benefits were immense.
I think that the benefits from fundamental research are less than those which could be derived from putting a greater effort into the application of such research to production scales. The definition of research and development adopted by the D.S.I.R. and the Federation of British Industries actually includes the production of pilot plant.
This is sensible because a criticism often made of this country is that, whereas as my hon. Friend pointed out we are very good at producing new inventions, since the war we have failed in a number of very significant cases to carry those new ideas to the production stage.
I do not say that we have necessarily spent enough on fundamental research itself. I agree with my hon. Friend that the amounts which are spent by the research associations are minimal, but if we have a certain amount of money to spend it may be that better results would be obtained by increasing the amount spent on application of the results of fundamental research so that inventions already produced in this country can be better exploited.
As I see it, there is no hard-and-fast dividing line between fundamental research and development. The hon. Member for Middlesbrough, West (Dr. Bray), who has experience of the chemical industry, will perhaps confirm that in that industry, as I believe in the drug industry as a whole, the construction of a pilot plant is an extremely important stage in developing a new product or process. Particularly in the organic chemical field the behaviour of these products is notoriously unpredictable. The processes are very much influenced by factors such as rate of flow and temperature of the raw materials concerned Hence, when these new products are developed, it is necessary for small pilot plants to be put in in advance of full-scale investment, which would be very costly indeed.
I think that there is no doubt whatever that the amount of help which would be given by this Amendment would be very valuable indeed. In the Report of the Research Council for last year we read:
By means of a scheme for special assistance to industry we have offered grants with the object of demonstrating how research results can be applied in industry to improve efficiency and increase productivity.
This is recognised by the Research Council, although I admit that it was not so much concerned with capital expenditure as with the dissemination of information on new projects, but the object is still the same. I also quote another interesting point raised in the Report of the N.R.D.0 last year, which said on page 2:

But frequently development projects emerge which while appearing worthwhile from the national point of view, are not attracted to industry. For example, the development period may be too long; industry cannot afford to lock up its money over the period. Or a firm, while having a meritorious invention, may not be able itself to raise all the finance necessary for its development, notwithstanding that it has the desire to do so. Or there may be no industry in being to which the invention is applicable; application will require the establishment of an entirely new industry. Or the financial return from a successful project while likely to bring large profits to users and others who will benefit from the results may be insufficient to recoup the organisation which foots the bill.
In those circumstances, we may be missing out on modern inventions which would be extremely valuable to this country if they could be exploited, but for the reasons admirably summarised in that Report the finance is not necessarily forthcoming. By this Amendment we seek to improve on the number of inventions brought to the production state. Therefore, it is with great pleasure that I support the Amendment so ably moved by my hon. Friend.

Mr. Barber: I intervene at this stage only because I think that what I have to say will give considerable weight to assuring the hon. Member for Huddersfield, West (Mr. Wade) and the hon. Member for Orpington (Mr, Lubbock) that this Amendment is not necessary. It may, therefore, be for the convenience of the Committee if I intervene now.
The purpose of the Amendment is to ensure that capital expenditure on
pilot plants for the application of scientific research
qualifies for the scientific research allowance. The allowance, as the Committee knows, is to be improved under the Clause as it stands so as to be allowed at once for the first year of assessment instead of being spread over a five-year period as it has been hitherto.
I hope that I shall be able to convince the two hon. Members that the Clause is wide enough as it stands. The position will be that any new plant and machinery provided by a trader for the purpose after 5th November last qualifies for an investment allowance of 30 per cent. of the cost. If it is provided for scientific research connected with the trade it will qualify for the 100 per cent. write-off. Otherwise it would have the initial allowance of 10 per cent. and, under Clause


35, the annual allowances on the scale laid down in that Clause.
Clause 36 does not in any way affect the type of expenditure which qualifies for the scientific research allowance. It only alters the way in which the allowance is given. The allowance is given to a person carrying on a trade for capital expenditure on scientific research relating to that trade, and then scientific research is defined in Section 340 of the Income Tax Act, 1952, as:
Any activities in the fields of natural or applied science for the extension of knowledge.
That is expanded further, but I will not trouble the Committee with the details of that further expansion.
The relief is given, in short, for capital expenditure on scientific research as it is generally understood—that is to say,
activities in the fields of natural or applied science for the extension of knowledge";
and it would therefore be given for such expenditure both in original research and in the application of know scientific principles in a new field.
The Amendment would deem any expenditure on pilot plant for the application of such research to be included in scientific research expenditure for the purposes of the allowance. The present practice is that capital expenditure not only on pure research but on the development of pilot plant to demonstrate that the research can be applied on a manufacturing scale is treated as allowable. The explanatory notes issued to the public by the Board of Inland Revenue read—and I will read two or three lines which I hope will reassure hon. Members:
Capital expenditure incurred by a trader on scientific research related to his trade …for example on the provision of laboratories, pilot plant or other equipment, is allowable for Income Tax purposes by five annual instalments.
That latter position is being improved.
If hon. Members have any case in mind in which they think that this provision raises any difficulty, I shall be happy to look into it but, in view of what I have said, I hope they will feel that the existing law is wide enough to cover pilot plant in the normal use of the phrase. I hope that they will feel that the Amendment is unnecessary.

Mr. Mitchison: We have here a defini-

tion of development in the last Report of the Advisory Council on Scientific Policy and it runs:
Work directed to the introduction or improvement of specific projects or applications up to and including the prototype or pilot plant stage.
Is that covered by scientific research?

Mr. Barber: I can only tell the hon. and learned Member that what is included in capital expenditure on scientific research—it must be related to the purposes of trade—is the provision of laboratories, pilot plant and other equipment. I know of no difficulty in which any trader has been involved in connection with this application to what I might call the parent Section. As I mentioned at the outset, the Clause in no way affects the type of expenditure which qualifies for the scientific research allowance.
I understand that the hon. Member for Huddersfield, West doubts whether either in law or in practice the legislation dealing with scientific research allowances, which are merely improved by the Clause, covers pilot plant used for the application of research. As far as I understand the legal position, it does. As for the practice of the Board of Inland Revenue, I can only refer the hon. Gentleman to what I have said, namely, that capial expenditure on scientific research, including pilot plant, is allowable for Income Tax purposes.

Mr. J. Grimond: The hon. Member said that he has had no complaint from manufacturers about the application of the existing law. Has he had any correspondence with research associations? Have they found any difficulty from their point of view, when manufacturers set up pilot plant, to take advantage of what the research associations have recommended?

Mr. Barber: Personally I know of none. This is clearly something of great concern to the Liberal Party and it is relevant to all that we desire—such as economic growth and the betterment of the people, to which much reference has been made. But since three Liberal hon. Members have raised the matter, and since I think that the Amendment is wholly unnecessary because the point is covered in legislation, I am entitled to ask the representatives of the Liberal Party whether they know of any case which goes contrary to what I have said.

Mr. Mitchison: There is another course open to the hon. Member. Why does he not accept the Amendment? If the present law includes pilot plant, I assure him that it is far from self-evident on the language of the Act. If he does not like this form of words let him take another form.
I am surprised to hear that scientific research expenditure as defined in the Income Tax Act is read by the Inland Revenue as including the building of pilot plant. I share some of the doubts of the hon. Member for Huddersfield, West (Mr. Wade) about exactly what pilot plant is. There are a number of cases in which it is quite clear and a number of others in which it may not be so clear, but no doubt it represents something.
May I refer to the definition of development in paragraph 59 of the last Report of the Advisory Council on Scientific Policies? This is in a series of three paragraphs headed "Types of Research"; and the other types of research dealt with are basic research, applied research and then development.
Financially, this is quite a serious matter, because on page 38 of the same Report we find that expenditure on scientific research and development is given as though they were separate things. It is divided in respect of private industry under basic research, applied research and development, and, not unnaturally, development covers 77 per cent. of the total spent by private industry. It is much the largest item. I suggest that if development is covered by the existing provisions there is a case for clarifying the language of the 1952 Act.
If the hon. Member is prepared to accept the Amendment, or to assure me that a definition will be inserted expressly to include pilot plant, I shall have little more to say. He might take the words in the Report and not be far off the mark, even for fiscal purposes. But without that assurance I have more to say. I will give way to him if he will give me that assurance. If he will not, I must add that this is an important matter not only from the strictly fiscal point of view, but also from a point of view stressed by both the hon. Member for Huddersfield, West and the hon. Member for Orpington (Mr. Lubbock).
If one looks at the N.E.D.C. Report, the first green Report, which is a very important document, one finds that it strongly expresses the relation between productivity and not only the discovery of new things but the application of new things. The Report goes at some length into the difficulty. But I do not wish to take up time. It refers to getting these things into the head and practice of the British industrialist. It is not a criticism of all industrialists. The Report specifically refers to the difficulty with small firms.
In previous debates on this matter an hon. Member opposite talked about the innate conservatism of British industry. I dare say that innate conservatism just before a General Election, in one sense of the word, may have its advantages, but in another sense it is holding this country back badly. This becomes clear from looking at the Report, and I could give other instances, too. The real problem is to get the practical application of what the scientists in the universities, Government establishments and places financed by research councils discover put into practice by British industry. That is what we call development.
People now talk about "the gap" and in this context the gap they mean is the gap between the basic or applied research and developments in the sense in which it is defined in the Report. The Amendment is intended to make it quite clear that both sides of the gap are covered by the provisions of the Clause. We can discuss them in detail later on the Clause as a whole. There should be no doubt what is covered. At present, the language of the legislation is far from clear to the ordinary person. Whatever the practice of the Revenue, this matter should be clearly written into our legislation.

Mr. Barber: I am sure that the hon. and learned Member for Kettering (Mr. Mitchison) would be the first to agree that if it were clear in our legislation that pilot plant was satisfactorily dealt with on the lines proposed by the Amendment he would not wish to move an Amendment, or to support one to alter the law; that is, if it was clear. At the moment, he doubts that it is clear.
There are two points I would like to bring to the attention of the Committee


in this connection. First—and this is by no means conclusive, although extremely relevant because we are interested in the legislation itself—I would remind hon. Members of something about which I previously thought it would not be necessary to trouble the Committee. The point is that this allowance was introduced in 1944 when the Chancellor of the day said that research had three aspects. About fundamental research of the scientist, he said:
…what I might describe as the pilot plant stage, where laboratory results are tried out experimentally on a larger scale…".
Then he went on:
Every industrialist knows that it is a real difficulty to translate the delicate skill of the scientific researcher and the artificial conditions in which he may have worked, into terms of large-scale production.
And then he described his proposals as a
…comprehensive attempt to relieve from taxation altogether funds devoted by industry to the support of fundamental research, to the translation of laboratory research to production, and to the full-scale development of the product"—[OFFICIAL REPORT, 25th April, 1944; Vol., 399, c. 677–9.]
This, I believe, is the fundamental desire of hon. Members opposite. Thus the question is, first, whether this is provided for satisfactorily in the legislation as it stands, and, secondly, whether it is giving any difficulty. In all sincerity, I ask hon. Members opposite—and I will deal with the legislation in a moment—to let me know of any case where it is thought that pilot plant should have qualified but has not. I would be delighted to look into it. I had assumed that the Liberal Party had a number of such cases, or at least one to bring to my notice. When I came into the Chamber this afternoon I thought that its representatives would cite some instances.
As for the existing legislation, I would remind the Committee that an allowance is given to a person carrying on a trade for capital expenditure on scientific research related to his trade. As I said, scientific research is defined in the Income Tax Act, 1952, as
…any activities in the fields of natural or applied science for the extension of knowledge…
When I dealt with this matter earlier, I said that I could expand upon that, but I did not know at the time whether

or not it would be right to delay the Committee in doing that. However, it can be expanded on as follows, as laid down in the 1952 Act:
…references to expenditure incurred on scientific research do not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research, but, save as aforesaid, include all expenditure incurred for the prosecution of, or the provision of facilities for the prosecution of, scientific research; references to scientific research related to a trade or a class of trades include—
(a) any scientific research which may lead to or facilitate an extension of that trade …
The proof of the pudding is in the eating and, so far as I know, there is no current case where this is causing difficulty. I am talking about the present, for I do not know what happened ten or fifteen years ago. If any hon. Member will let me know—it may be more convenient for him to do so by post so that I can have all the details—of any case where difficulty has arisen I will, in all sincerity, look into it to see whether any change is required.

Mr. Mitchison: Is the Financial Secretary not aware that the difficulty here concerns the sphere of natural or applied science? We are considering the setting up of a pilot plant and the meaning of its establishment in ordinary language. I see no reason for differing from that and this is related to the further sphere of development. If the Revenue treats it this way—and there is support for what the Financial Secretary said in the very announcement of 5th November—he will be aware that the Chancellor spoke of wishing to encourage research and development.
I am glad that it is the intention of the Government to do so, but why should they not accept the Amendment or undertake to put a similar one in its place, because it is not clear in the language of existing legislation what the position is? If there is considerable doubt about it and the matter is taken before the courts I think that the person who must prove that a pilot plant was within the definition of the legislation would find himself in considerable difficulty. I hope that the Government will either accept the Amendment or undertake to put in something else. If not, I hope that the Liberal Party will not drop the matter.

Mr. Barber: I want to be fair. I think that hon. Members know perfectly well that if there is a case which merits any consideration, I am the first person to consider it.
The Clause does not affect in any way the type of expenditure which qualifies for the allowance. This has remained the same since 1945 and, so far as I know, no difficulty over the definition and what is covered has been experienced. I repeat once again: if any hon. Member will write to me with details of any case I will look into the matter. If the law needs amending it will be amended, no doubt with the support of the Opposition, but, at the moment, I cannot see that it does.

Mr. Tam Dalyell: Failure to develop our own inventions has been a national characteristic of the British as far back as 1856. At that time aniline dyes were invented in this country, but by 1912 we had to depend for them on German industry. Surely the same sort of thing applies to computers. If my figures are correct, in the early 1950s this country led the world in the manufacturing of computers. The present position is that there are about £2,000 million worth of computers in the United States and about £42 million worth in Britain. We are importing about half the computers we need.
The Financial Secretary asked for an example. I will give him a concrete one concerning equipment for molecular biology. In the late 1950s this country led the world in this sphere. Now, in 1962–63, we are told that nine-tenths of those practising molecular biology are operating in the United States, and it is the opinion of the team in Cambridge that one reason for this is that so much of the highly sophisticated equipment has been made in the United States.
8.30 p.m.
That brings me to the Amendment. We are worried about the definition of a pilot plant, because we are not concerned so much with dramatic inventions as with the other more refined equipment necessary which constitutes

technological advance. I would ask the Financial Secretary whether the definition of pilot plant as he uses it extends to the refinement of scientific equipment which is, perhaps, not basically different from what has been used before but is a little different here and there.

Mr. Wade: I accept the invitation to write to the Financial Secretary, and I now have only two points to make. The first concerns the legal interpretation. I am aware of the Section that he read out, of which the material words are:
…scientific research' means any activities in the field of natural or applied science for the extension of knowledge…
Can one really contend that the erection of plant with a view to production comes within that definition as being for the extension of knowledge? I think that it is rather doubtful. I am aware of the other words
…the provision of facilities for the prosecution of, scientific research …
but one still conies back to the phrase
…for the extension of knowledge…
I believe that it would be well worth while to consider whether some modification of the wording is necessary.
I do not think that the practice of the Revenue is sufficiently well known, and I am glad to have heard what has been stated. Nevertheless, I am still a little uncertain whether it covers all that I mean by pilot plant erected with a view to production. I hope that the Committee will feel that it has been worth while my raising this matter in order to elicit the information we have had from the Treasury Bench, but I am not yet entirely satisfied. It might be worth while having some amending legislation later.

Dr. Bray: I wonder whether the Financial Secretary might not take a way out of the difficulty, not by altering the law relating to this matter but by causing the country generally to adopt the very enlightened usage of the Inland Revenue in the interpretation of "research", which seems to be wholly admirable?

Question put, That those words be there inserted:—

The Committee divided: Ayes 169, Noes 224.

Division No.117.]
AYES
8.33 p.m.


Alnsley, William
Awbery, Stan (Bristol Central)
Beaney, Alan


Albu, Austen
Bacon, Miss Alice
Bence, Cyril


Allaun, Frank (Salford, E.)
Balrd, John
Bennett, J. (Glasgow, Bridgeten)


Allen, Scholefield (Crewe)
Baxter, William (stlrligshire, W.)
Benson, Sir George




Blackburn, F.
Houghton, Douglas
Price, J. T. (Westhoughton)


Blyton, William
Hoy, James H.
Probert, Arthur


Boardman, H.
Hughes, Cledwyn (Anglesey)
Pursey, Cmdr. Harry


Bowden, Rt. Hn. H. W. (Lelcs, S.W.) 
Hughes, Emrys (S. Ayrshire)
Randall, Harry


Bowen, Roderic (Cardigan)
Hunter, A. E.
Rankin, John


Braddock, Mrs. E. M.
Hynd, H. (Accrington)
Redhead, E. C.


Bray, Dr. Jeremy
Hynd, John (Attercliffe)
Rhodes, H.


Broughton, Dr. A. D. D.
Irvine, A. J. (Edge Hill)
Roberts, Albert (Normanton)


Butler, Herbert (Hackney, C.)
Irving, Sydney (Dartford)
Roberts, Goronwy (Caernarvon)


Carmichael, Neil
Janner, Sir Barnett
Robertson, John (Paisley)


Castle, Mrs. Barbara
Jeger, George
Robinson, Kenneth (St. Pancras, N.)


Chapman, Donald
Johnson, Carol (Lewisham, S.)
Rodgers, W. T. (Stockton)


Collick, Percy
Jones, Dan (Burnley)
Ross, William


Craddock, George (Bradford, S.)
Jones, Elwyn (West Ham, S.)
Short, Edward


Cronin, John
Jones, J. Idwal (Wrexham)
Silverman, Julius (Aston)


Crosland, Anthony
Jones, T. W. (Merioneth)
Silverman, Sydney (Nelson)


Crossman, R. H. S.
Kelley, Richard
Skeffington, Arthur


Cullen, Mrs. Alice
King, Dr. Horace
Slater, Joseph (Sedgefield)


Dalyell, Tam
Lawson, George
Small, William


Davies, G. Elfed (Rhondda, E.)
Ledger, Ron
Smith, Ellis (Stoke, S.)


Davies, Harold (Leek)
Lee, Miss Jennie (Cannock)
Spriggs, Leslie


Davies, S. O. (Merthyr)
Lever, Harold (Cheetham)
Steele, Thomas


Deer, George
Lewis, Arthur (West Ham, N.)
Stones, William


Delargy, Hugh
Lubbock, Eric
Stross, Dr. Barnett(Stoke-on-Trent, O.)


Dempsey, James
Mabon, Dr. J. Dickson
Swain, Thomas


Diamond, John
McBride, N.
Swingler, Stephen


Dodds, Norman
MacColl, James
Taylor, Bernard (Mansfield)


Edwards, Rt. Hon. Ness (Caerphilly)
MacDermot, Niall
Thomas, lorwerth (Rhondda, W.)


Edwards, Robert (Bilston)
McInnes, James
Thompson, Dr. Alan (Dunfermline)


Edwards, Walter (Stepney)
McKay, John (Wallsend)
Thornton, Ernest


Finch, Harold
MacPherson, Malcolm (Stirling)
Timmons, John


Fitch, Alan
Mallalieu, J.P.W.(Huddersfield, E.)
Tomney. Frank


Fletcher, Eric
Manuel, Archie
Wade, Donald


Foot, Michael (Ebbw Vale)
Mason, Roy
Wainwright, Edwin


Forman, J. C.
Mellish, R. J.
Warbey, William


Fraser, Thomas (Hamilton)
Mendelson, J. J.
Watkins, Tudor


Galpern, Sir Myer
Millan, Bruce
Wells, William (Walsall, N.)


George, Lady MeganLloyd (Crmrthn)
Milne, Edward
White, Mrs. Eirene


Ginsburg, David
Mitchison, G. R,
Whitlock, William


Grey, Charles
Monslow, Walter
Wilkins, W. A.


Griffiths, David (Rother Valley)
Moody, A. S.
Willey, Frederick


Griffiths, Rt. Hon. James (Lianelly)
Morris, John
Williams, LI. (Abertillery)


Griffiths, W. (Exchange)
Moyle, Arthur
Williams, W. R. (Openshaw)


Grimond, Rt. Hon. J.
Neal, Harold
Williams, W. T. (Warrington)


Hale, Leslie (Oldham, W.)
Noel-Baker, Francis (Swindon)
Willis, E. G. (Edinburgh, E.)


Hamilton, William (West Fife)
Noel-Baker, Rt. Hn. Phillip (Derby, S.)
Wilson, Rt. Hon Harold (Huyton)


Hannan, William
O'Malley, B. K.
Winterbottom, R, E.


Harper, Joseph
Oram, A. E.
Wyatt, Woodrow


Hayman, F. H.
Oswald, Thomas
Yates, Victor (Lady wood)


Herbison, Miss Margaret
Pannell, Charles (Leeds, W.)



Hill, J. (Midlothian)
Parker, John
TELLERS FOR THE AYES:


Hilton, A. V.
Pearson, Arthur (Pontypridd)
Mr. Charles A. Howell and


Holman, Percy
Pentland, Norman
Mr. Ifor Davies.


Hooson, H. E.
Prentice, R. E.





NOES


Agnew, Sir Peter
Chichester-Clark, R.
Emery, Peter


Allason, James
Clark, Henry (Antrim, N.)
Emmet, Hon. Mrs. Evelyn


Ashton, Sir Hubert
Clark, William (Nottingham, S.)
Errington, Sir Eric


Atkins, Humphrey
Clarke, Brig. Terence (Portsmth, W.)
Farey-Jones, F. W.


Awdry, Daniel (Chippenham)
Cole, Norman
Farr, John


Bainiel, Lord
Cooke, Robert
Finlay, Graeme


Barber, Anthony
Cooper, A. E.
Forrest, George


Barter, John
Cooper-Key, Sir Neill
Fraser, Rt. Hn. Hugh(Stafford&amp; Stone)


Batsford, Brian
Cordeaux, Lt.-Col. J. K.
Freeth, Denzil


Bennett, Dr. Reginald (Gos &amp; Fhm) 
Corfield, F. V.
Galbraith, Hon. T. G. D.


Bingham, R. M.
Costain, A. P.
Gammans, Lady


Birch, Rt. Hon. Nigel
Courtney, Cdr. Anthony
Gardner, Edward


Bishop, F. P.
Craddock, Sir Beresford (Spelthorne)
George, Sir John (Poilok)


Black, Sir Cyril
Crosthwaite-Eyre, Col. Sir Oliver
Gibson-Watt, David


Bourne-Arton, A.
Crowder, F. P.
Gilmour, Sir John (East Fife)


Box, Donald
Curran, Charles
Glyn, Dr. Alan (Clapham)


Boyd-Carpenter, Rt. Hon. John
Dalkeith, Earl of
Goodhart Philip


Boyle, Rt. Hon. Sir Edward
Dance, James
Goodhew, Victor


Brewis, John
d' Avigdor-Goldsmid, Sir Henry
Gower, Raymond


Bromley-Davenport, Lt.-Col. SirWalter
Digby, Simon Wingfield
Gresham Cooke, R.


Brown, Alan (Tottenham)
Donaldson, Cmdr. C. E. M.
Grosvenor, Lt.-Col. R. G.


Buck, Anthony
Doughty, Charles
Gurden, Harold


Bullard, Denys
Drayson, G. B.
Hall, John (Wycombe)


Bullus, Wing Commander Eric
du Cann, Edward
Hamilton, Michael (Wellingborough)


Campbell, Gordon (Moray &amp; Nairn)
Duncan, Sir James
Harris, Frederic (Croydon, N.W.)


Carr, Robert (Mitcham)
Eden, Sir John
Harris, Reader (Heston)


Cary, Sir Robert
Elliot, Capt. Walter (Carshalton)
Harrison, Col. Sir Harwood (Eye)


Channon, H. P. G.
Elliott, R.W.(Newc' Le-upon-Tyne, N.)
Harvey, Sir Arthur Vere (Macciesf'd)







Harvey, John (Walthamstow, E.)
Marten, Neil
Shaw, M.


Harvie Anderson, Miss
Matthews, Gordon (Meriden)
Shepherd, William


Hay, John
Maudling, Rt. Hon. Reginald
Skeet, T. H. H.


Heald, Rt. Hon. Sir Lionel
Mawby, Ray
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Riley, Joseph
Maxwell-Hyslop, R. J.
Smithers, Peter


Hill, Dr. RI. Hon. Charles (Luton)
Maydon, Lt.-Cmdr. S. L. C.
Spearman, Sir Alexander


Hirst, Geoffrey
Mills, Stratton
Speir, Rupert


Hobson, Sir John
Mlecampbell, Norman
Stanley, Hon. Richard


Hocking, Philip N.
Montgomery, Fergus
Steward, Harold (Stockport, S.)


Holland, Philip
Moore, Sir Thomas (Ayr)
Stodart, J. A.


Hollingworth, John
More, Jasper (Ludlow)
Stoddart-Scott, Col. Sir Malcolm


Hopkins, Alan
Morgan, William,
Storey, Sir Samuel.


Hornsby-Smith, Rt. Hon. Dame P.
Morrison, John
Studholme, Sir Henry


Howard, John (Southampton, Test)
Nabarro, Sir Gerald
Summers, Sir Spencer


Hughes Hallett, Vice-Admiral John
Nicholson, Sir Godfrey
Tapsell, Peter


Hughes-Young, Michael
Oakshott, Sir Hendrie
Taylor, Sir Charles (Eastbourne)


Hulbert, Sir Norman
Osborn, John (Hallam)
Taylor, Frank (M'ch'st'r, Moss Side)


Hutchison, Michael Clark
Osborne, Sir Cyril (Louth)
Taylor, Sir William (Bradford, N.)


Iremonger, T. L.
Page, Graham (Crosby)
Temple, John M.


Jennings, J. C.
Pannell, Norman (Kirkdale)
Thatcher, Mrs. Margaret


Johnson, Dr. Donald (Carlisle)
Partridge, E.
Thompson, SirRichard (Croydon,S.)


Johnson, Eric (Blackley)
Pearson, Frank (Clitheroe)
Thornton-Kemsley, Sir Colin


Jones, Arthur (Northants, S.)
Peel, John
Tiley, Arthur (Bradford, W.)


Kerby, Capt. Henry
Percival, Ian
Touche, Rt. Hon. Sir Gordon


Kerr, Sir Hamilton
Peyton, John
Turner, Colin


Kershaw, Anthony
Pickthorn, Sir Kenneth
Tweedsmuir, Lady


Kitson, Timothy
Pilkington, Sir Richard
van Straubenzee, W. R.


Lagden, Godfrey
Pitt, Dame Edith
Vane, W. M. F.


Langford-Holt, Sir John
Pott, Percivall
Vaughan-Morgan, Rt. Hon. Sir John


Leather, Sir Edwin
Powell, Rt. Hon. J. Enoch
Vickers, Miss Joan


Legge-Bourke, Sir Harry
Price, David (Eastleigh)
Walder, David


Lewis, Kenneth (Rutland)
Prior, J. M. L.
Walker, Peter


Lilley, F. J. P.
Prior-Palmer, Brig. Sir Otho
Wall, Patrick


Linstead, Sir Hugh
Profumo, Rt. Hon. John
Ward, Dame Irene


Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)
Pym, Francis
Whitelaw, William


Lloyd, Rt. Hon. Selwyn (Wirral)
Quennell, Miss J. M.
Williams, Dudley (Exeter)


Longden, Gilbert
Rawllnson, Sir Peter
Williams, Paul (Sunderland, S.)


Loveys, Walter H.
Redmayne, Rt. Hon. Martin
Wills, Sir Gerald (Bridgwater)


Lucas-Tooth, Sir Hugh
Rees, Hugh
Wilson, Geoffrey (Truro)


McAdden, Sir Stephen
Renton, Rt. Hon. David
Wise, A. R.


McLaren, Martin
Roberts, Sir Peter (Heeley)
Wolrige-Gordon, Patrick


McLaughlin, Mrs. Patricia
Roots, William
Wood, Rt. Hon. Richard


Maclay, Rt. Hon. John
Ropner, Col. Sir Leonard
Woollam, John


Maclean, SirFitzroy(Bute&amp; N.Ayrs)
Russell, Ronald
Worsley, Marcus


McMaster, Stanley R.
Sandys, Rt. Hon. Duncan



Maginnls, John E,
Scott-Hopkins, James
TELLERS FOR THE NOES,


Markham, Major Sir Frank
Seymour, Leslie
Mr. Ian Fraser and


Marahall, Douglas
Sharples, Richard
Mr. MacArthur.

Clause ordered to stand part of the Bill

Clause 37.—(ANNUAL ALLOWANCES FOR MINERAL DEPLETION IN THE UNITED KINGDOM.)

Question proposed, That the Clause stand part of the Bill.

Dr. Horace King: I welcome the Clause, and I promise the Committee that my speech will not be so long as the Clause itself, which is the longest in the Bill. Incidentally, it is fifty times longer than the Remuneration of Teachers Bill and about a thousand times better. At the outset, I should explain that the Economic Secretary and I have a special interest in the Clause, not a financial one, because we are among the group of hon. Members on both sides who have been pressing for something like the reform which is provided by it. I congratulate the Chancellor of the Exchequer on introducing the

Clause which gives concessions to the extractive industries, concessions which, I believe, are not only just but long overdue. It is sometimes thought outside the House of Commons that back benchers are merely voting machines, but the history of how this reform has reached the stage of a Clause in the Finance Bill shows how untrue this is, and how back benchers can by persistent advocacy at last convince a Government.
Agitation for the reform we are asked to approve tonight began with the efforts of a few back benchers, including the present Economic Secretary, the present Joint Parliamentary Secretary to the Ministry of Health and hon. Members on both sides, on behalf of industries like the sand and gravel industry and the china clay industry, after representations had been made to us which convinced us that the cause was a just one. We were supported in our conviction by the recommendations of the Millard Tucker Committee on the Taxation of Trading Profits


in 1951 and, later, by the Royal Corn-mission of 1955, from whose Report I quote only two sentences:
In future a depletion allowance should be given in respect of the cost of acquisition of mineral rights or areas …
The second sentence reads:
The basis-of relief should be the actual monetary cost less any residual value of the land at the close of working.
8.45 p.m.
In these two sentences is the heart of the claim of the extractive industries and the heart of the solution of the problem with which this Clause deals. The simple case of such an industry is that its capital is its raw material, and that, as it extracts the raw material, it is using up its capital and therefore it should have a capital depreciation allowance. This is true a fortiori because such an allowance was already given to British companies doing extractive industrial work overseas.
It is worth recalling that support in the House of Commons alternately grew and diminished. We had sympathetic noises from the Treasury Bench one year. There was another year which I well remember when there was an onslaught from the combined forces of the Treasury and the Federation of British Industries against this reform. One of the proudest traditions of this Committee is the utter objectivity and impartiality of the Chair. I can remember sitting in the Chair with such objectivity during the deliberations on one Finance Bill when that combined onslaught dealt a severe blow to a Clause in which, if I had not been in the Chair, I should have been interested.
On the last occasion that a Clause similar to this one was before us, namely, last year, not only were the whole of the Opposition in favour of it but there were so many supporters on the Government side that had it gone to a Division we should have carried the Clause with or without the support of the Government Front Bench. One of the unfortunate things last year was that that Clause was not selected. Had it been selected I am sure that it would have been law, either in the form of the Clause that we are considering or in some other form, a year earlier.
The principle of the Clause is simple, but its application is highly complex. There are all kinds of safeguards and limitations which the Treasury, rightly, has

had to insist upon, and which presented difficulties which it found insuperable up to the present. One of the reasons why the Clause is so long—such a brobdingnagian Clause—is the complex problems which it has to solve. All the interests —the interests of the Treasury, of the extractive and not so extractive industries and of the mystery body, the F.B.I. —have now arrived at a compromise embodied in the Clause. It at any rate gives rough justice both to the extractive industries and to the Treasury.
I will not comment on the Clause in detail. When both sides of the Committee are agreed about a reform, it is risky to prolong the debate. I commend it wholeheartedly to the Committee, and I do so in the words of the hon. Member for Essex, South-East (Mr. Braine) in 1956 when we were pleading for a Clause such as this. He said:
…justice, common sense and the broad national interest all combine in this instance…."—[OFFICIAL REPORT, 25th June, 1956; Vol. 555, c. 99.]
We are dealing with important industries. The china clay industry is important in the export market. The sand and gravel industry is responsible for most of the new square box-like buildings which delight most hon. Members and me not so much. This great concrete modern architecture is based on the work of the sand and gravel industry. It is responsible for most of the engineering and factory building and much new housing in the country. This is a large and important industry which has long laboured under an injustice which the Clause will put right.
I sincerely thank the Chancellor of the Exchequer for at long last bringing this reform before the Committee. I know that the Economic Secretary, who will reply to this debate, must have the same joy that I have in seeing this Clause in the Finance Bill.

Mr. du Cann: Indeed, I have. I know that my right hon. Friend would wish me to say to the hon. Member for Southampton, Itchen (Dr. King) how much he appreciates the kindly and courteous things that he said.
I am glad to think that this Clause might have the approval of the Committee. The hon. Gentleman was quite right to remind me that with him and


many other hon. Members I was much concerned in making rude speeches from the back benches, suggesting that it is high time that justice was provided for the mineral extractive industries. He is also right to complain a little, even though ever so politely, of the length of the Clause, nearly five pages, but he and the Committee may wish to know—and I am authorised to say this—that we understand that the formula and phrasing of the Clause are regarded as most satisfactory from the point of view of the industry.
To use the hon. Gentleman's phrase, not only are we providing justice but we are providing it in a way which appears to be appreciated by the industry. There are so many hon. Members on both sides of the Committee who are concerned with this that I shall not mention any names at all. I should, however, like to remind the Committee of the late Sir Gurney Braithwaite, who was very interested in this matter. I have always had a warm spot in my heart for "Old Gurney", ever since he came to speak for me in my constituency during a period of economic crisis, a situation with which we are all, unfortunately, far too frequently familiar.
I remember "Old Gurney" saying to a very restive audience, "I turn now to the economic situation. The figures are bad, but that does not discourage me in the least. I am used to bad figures, for all my life I have been a supporter of the Somerset County Cricket Club." Things are different now. I am grateful to the hon. Gentleman for what he said, and I am glad to think that this Clause has the welcome of the Committee.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 38.—(ANNUAL ALLOWANCES FOR NEW MACHINERY AND PLANT IN DEVELOPMENT DISTRICTS.)

Mr. W. Clark: I beg to move, in page 38, line 12, to leave out "by a person".

The Temporary Chairman (Mr. G. Thomas): I think that it would be convenient if we discussed this Amendment with the Amendment in page 38, line 14, leave out "by him".

Mr. Clark: The present wording of the Clause creates an anomaly for industrialists who use leased equipment, and I would remind the Committee that leased equipment or plant on lease, is being more and more widely used in industry. Not only is it anomalous, but it is uneconomic to have a position where, if one buys machinery one get free depreciation, and, if one leases it, one does not get free depreciation. I hope that I shall have a little more success on this Amendment than on a previous one. I trust that my hon. Friend will look at this sympathetically.

Mr. Barber: As my hon. Friend the Member for Nottingham, South (Mr. W. Clark) says, these Amendments go together. Their purpose is to ensure that free depreciation will be available to a person who provides new plant and machinery which he then leases out to industrialists to be used in a development district.
The Clause as drafted provides free depreciation only for capital expenditure incurred by a person on the provision of new plant or machinery for use by him in a development district. It therefore cuts out the case where a lessor hires out machinery or plant for use by someone else. If a lessor is given free depreciation on items leased to a trader in a development district, he will be more inclined, I should have thought, to hire it out there than elsewhere and might perhaps reduce the rent. It would be in accordance with the object of the Clause to extend the free depreciation to cases of hiring.
These Amendments are satisfactory to achieve the object, and, strange though it may seem, I advise the Committee to accept them.

Amendment agreed to.

Further Amendment made: In page 38, line 14, leave out "by him".—[Mr. W. Clark.]

Mr. Mitchison: I beg to move, in page 38, line 26, at the end to insert:
Provided that this subsection shall apply to the provision of a new fishing boat (within the meaning attributed to that phrase by section 370 of the Merchant Shipping Act 1894) entered in the fishing boat register at any port in a development district and habitually working from that port or in waters adjacent to a development district and to


the provision of new engines or new equipment for such a fishing boat as it applies to the provision of new machinery or plant (not being mobile equipment) for use in a development district for industrial purposes.

The Temporary Chairman: With this Amendment may be discussed the Amendment in line 37, at end insert:
or a fishing boat is not habitually working from her port of registry or in waters adjacent to a development district.",
and that in line 39, after "plant", insert:
or, as the case may be, in respect of the fishing boat, her engines or equipment".

Mr. Mitchison: The two last-mentioned Amendments are consequential in the strictest sense of the word, and all I need invite the Committee to do is to look at the Amendment which I have moved. It is a short and simple Amendment, and I am much encouraged by the welcome which the Government gave to the last Amendment.
The present position is that the provisions of the Clause—which amount to being able to write off the whole of capital expenditure as one likes; in one lump, if necessary—apply only to:
the provision of new machinery or plant (not being mobile equipment) for use in a development district…".
I quite understand the omission of mobile equipment in general, for if one did not do that the man who had a motor car derived from some Scottish factory might have a plausible claim to say that he would receive the benefit from the Clause. But there is one particular case, and that is what I desire to raise.
In some development districts, particularly perhaps in the Scottish ones, there are real fishing industries, very often on a small scale, and there are some in the south of England. Though they are not all based on development districts, a considerable proportion of them are. These fishermen, the owners of the boats, who may often be the actual people working in the boats, are using something which to them is a means of livelihood and is really a floating workshop in the sense that they get the fish out of the sea and themselves are employed in converting the yield of the sea into human food. They are in that sense using machinery just as anyone might be who was using a factory on the ground which provided food or clothes.
On the merits of the matter, I should have thought that there was very little doubt that the benefit intended to be given by the Clause in development districts ought to be extended to these people. It is no great point to say that these people are usually very badly off. They usually are, but, unfortunately, they have a particularly chancy trade. The results of fishing from one season to another are, on the whole, outside their control and may vary considerably; one year may be a very hard one and the next may be a very good one.
Therefore, provisions of this sort may be of real value to them and appropriate to what they are doing. They will prevent the whole of the results, or a considerable part of them, of the good year being absorbed in taxes while only a small part of the cost of the boats and the engines comes under existing legislation to be written off.
9.0 p.m.
They comprise, therefore, a case to which the provisions of the Clause could very properly and usefully be applied. In addition, the inhabitants of these places represent very often a substantial part, and sometimes almost the whole, of their communities—for instance, on the coast of Scotland. These are men who have put their money into this kind of enterprise, leading lives not entirely free from danger. They are men who serve their country with great distinction during war —and I hope we shall never have that kind of thing again—as well as making a really valuable and necessary contribution not only to our food supply, but also, since we do not necessarily eat all they catch in a good haul, to the agricultural industry through the manure from fish.
They are producers of basic products, using the boats and the engines they have to buy themselves. These things are quite expensive. I should admit that I share with my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) the distinction of being an honorary officer of the Clyde Fishermen's Association. I say that with some pride.

Mr. Ellis Smith: Are there any fish in the Clyde?

Mr. Mitchison: Yes. My hon. Friend may well have eaten quite a lot of herring


from the Clyde, caught rather more south than Glasgow but still from the Clyde.
As I was saying, these folk serve a very useful purpose and, therefore, if we can possibly arrange to include them in these benefits we should be carrying out the general intention of the Local Employment Act. The fishing industry in these places is having a hard time. If there is a succession of bad seasons, the number of fishing boats becomes reduced and many of the men leave the sea and look for work elsewhere.
In Scotland, all that means is a man trying to find a house and job in Glasgow. No one ought to be driven, if, by legislation, we can make provision to avoid it, to leave fishing off the West Coast of Scotland in order to try and find a house and a job in Glasgow, because, although the one may be difficult in one way, the other is just as difficult in another way. It does not help the employment position of Scotland as a whole if people have to give up fishing and go to large towns for work.

Captain W. Elliot: I agree with the arguments used by the hon. and learned Member, but would not he agree that they apply equally to fishing boats from whatever port they come and not necessarily only to ports in development districts?

Mr. Mitchison: Of course, they apply to all fishing boats, but this Clause is intended to give special help to development districts. I am trying to apply it to the case of the fishing industry in those districts. No doubt there is a case for saying that fishing boats all over the country should have something of the sort, but that does not arise under this Clause. In a helpful spirit, the Clyde Fishermen's Association put the hon. and gallant Gentleman's suggestion to the Treasury, but my feeling was that in a Clause intended to help development districts particularly, a general extension of benefits to fishing boats all over the country was hardly appropriate. Therefore, what I have tried to do is confined to benefiting the development districts.
In a case of this kind, if there is a ground for including a group of people on the merits of the case, one ought to be extremely critical of administrative difficulties and rather critical of people

who want to do something of this sort but cannot manage somehow or other to put it into intelligible language. I say at once that it is not an easy thing to do. The port of registry is not enough, because, if one wishes, one can register a fishing boat in any port in the Kingdom. There is nothing to prevent a man from Dover from registering his boat at Campbelltown, in Scotland.
On the other hand, it is the practice in the fishing industry either to work from a port, if one is going on rather long voyages, or, if one is working from a port in that sense, to practise, if I may use the word, coastal fishing and work round the coasts, often of a development district. That seems to provide a sufficient definition, and that is what is in the Amendment, of the kind of local help which one wants to give to these people in development districts, that is to say, to require the double test of local registry and then, to avoid what I will not call fraudulent but lake registries, a requirement that the boat should either be based on a port in a development district, or should work in waters adjacent to a development district.
If one is told that this is not easy to carry out and is not easy in practice, my answer is that in practice it is probably rather easier than it appears to be on paper, because this is a much supervised trade and the fishery officers know a great deal about what boats are doing, where they are working, and what their actual earning radius, as it were, is. Therefore, even if the Government say that this drafting will not do, I would say that I think that I have put down what is required and that it would work in this way, but that if the Government know of a better way, they should follow it.
I hope that the Government will accept the Amendment. After all, the Amendment last accepted was quite an extension. It was arguable, on grounds very different from these, but this is a very human case. The people who work in these boats have had and do have a very hard and uncertain life. They are people who call for any concessions we can make to more wealthy and propertied persons, be they companies or individuals, to be extended to them. They really deserve it and I hope that the Government will give them what we ask.

Mr. Barber: The hon. and learned Member for Kettering (Mr. Mitchison) said a great deal about the fishing industry and its work and all it does for the country, and with most of what he had to say on that score I agree. I do not propose to make any comment on the drafting of the Amendment, because the object is quite clear to anyone who reads it. If it were not, the hon. and learned Member has made the object clear in his speech.
The purpose is simply to provide that free depreciation should be available for new fishing boats, their engines and their equipment, which are entered in the fishing boat register in a port in a development district and which habitually operate from that port, or in waters adjacent to a development district.
Fishing boats are excluded from free depreciation because—and I should like to elaborate this in a moment—they cannot be said to be provided for use in development districts, and in any event are, as I think the hon. and learned Gentleman admitted, mobile equipment which is generally excluded, although no doubt he would say that, be that as it may, a special exception should be made for fishing boats.
As I understand it the suggestion is that free depreciation ought to be allowed because it would stimulate activity and employment in this trade which it is said is essentially bound up with development districts and whose fortunes effect in some measure the prosperity of development districts. This I think is true, but in framing his proposals for a powerful discriminatory instrument designed to benefit particular areas of the United Kingdom my right hon. Friend thought that it was of outstanding importance to benefit plant and machinery rooted in the area concerned for its enduring benefit. It was not his purpose to benefit plant or machinery which was used outside the areas. Mobile equipment is, by its very nature, likely to be used anywhere, and it would be practically impossible to police its use to ensure the withdrawal of relief, once it was given, if it were in fact used outside a development district.
The hon. and learned Gentleman said that he thought his proposal was in accordance with the principle behind this new idea of free depreciation. The claim

is, in effect, that the relief ought to have regard to the centre from which the industry is controlled, but, with respect, this is not the principle on which the relief has been framed, and to adopt it would involve either treating fishing vessels, or other ships, in a special way, or extending the relief to cover mobile plant of any description provided for use in a qualifying industry from a centre of operations in a development district.
As the hon. and learned Gentleman will have seen, transport undertakings are included in subsection (7) as trades which qualify for free depreciation in respect of their fixed plant and machinery, and I suppose it could be said that the relief ought to extend to private and transport concerns in respect of such of their rolling stock or buses or coaches as are operated from centres in development districts.
In short, the exclusion of fishing vessels, as of other ships and mobile items, follows not from any lack of sympathy with the problems of such industries, but from the necessity of settling a coherent basis for a novel kind of relief tied to activities in particular areas. I have every sympathy with the difficulties which certain sections of the fishing industry are experiencing, but I believe that to do as the hon. and learned Gentleman suggests would run counter to the objective of my right hon. Friend, and if it is necessary or desirable to assist the fishing industry to a greater extent than it is assisted at the present time, I think that there are other and better ways of doing so.

Mr. Emrys Hughes: Has the Financial Secretary any estimate of the cost of this concession?

Mr. Barber: I am sorry to say that I have not, although I would not have thought, in relation to some of the sums that we have been considering today, that it would be particularly large.

Mr. Harold Lever: I listened from a basis of impartial ignorance to the proposal of the Amendment and the answer given by the Minister. The cogent arguments of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) have been totally unanswered by the generalisations of one of the more intelligent Ministers of the Treasury.
The Minister defends his refusal of this concession by saying that the Clause must be coherent. What is coherent in a relief which restricts the tax advantages granted by the Clause as a whole to immobile equipment? Are the Government against mobility? Have they been metaphorically standing still for so long that they have a prejudice against mobility? Why should a development district be singled out for this selective treatment? If, for some reason, it is dangerous to give a tax concession by way of depreciation allowance to a special kind of mobile plant in a development district, why should not we maintain the same hostility in respect of other areas? I do not see where the coherence comes in.
9.15 p.m.
The Government have not explained why they are against giving this concession mobile plants. The Minister says that the Government to intend to provide help in respect of plant rooted in the area, and that is why they exclude mobile plant. I am not aware that an omnibus of a transport undertaking is rooted in such an area. If anything so little rooted as an omnibus can, by legislative ingenuity, be brought within the Clause, and if the Clause can still be regarded as coherent by the Treasury, I cannot see why equal coherence cannot be achieved for our hard-pressed fishermen.
We understand that the object of the Clause is to help these areas. Let us, for the sake of argument, assume that the Clause does encourage development in these areas. In those circumstances, why should not we encourage prosperity among the fishermen in these areas? They are given employment just as much if they go to sea in a subsidised boat as if they stay at home and work in a non-mobile factory which is subsidised by the Government. I cannot see why there should be this prejudice in favour of the stationary.
I cannot see why my hon. Friend so readily accepted that there was something wrong with subsidising a motor car by means of a depreciation allowance. I know that it is a very evil thing to own a motor car, and that it excites envy on the part of those who do not own a motor car, but it is a fairly well accepted thing, in 1963, to own a motor car. I am not

suggesting that my hon. and learned Friend falls into the category either of those who own a motor car or those who are envious of others who do, but I cannot understand why anybody, in 1963, should insist that a motor car is such a despicable object that it should be excluded from any concessions. It is a necessary cog in the industrial machine. Why should a man with a motor car not receive a depreciation allowance if that car is essential for his business, when a man who has something which is satisfactorily rooted in the ground receives the allowance?
It is the lack of coherence in the Clause which bemuses me, and makes me feel that we are entitled to a better reply. We may be told that there will be a certain amount of evasion if we subsidise cars or ships, but that argument does not impress me. Any form of Income Tax can be evaded if a person wants to be dishonest and fraudulent, and can get away with it. I cannot for the life of me see why we should not devise a form of wording to provide that where a ship is habitually or normally centred on a port in a development district which would be adequate to prevent fraud, unless the Minister has locked in his breast some secret aesthetic delight in some plant that is immobile, in contrast to ships and motor cars, which are apt to move.
The House should insist on a little common sense, coherence and logic in this Clause, and I hope that my hon. and learned Friend will not be satisfied with the answer that has been given, which has not rebutted a single one of his arguments. If it is necessary, I hope that he will register his protest in the Division Lobby.

Mr. Emrys Hughes: The Minister's reply has been the most unsatisfactory one that we have had in the course of our debates on this Bill. The usual reply from a Minister is that the proposed concession would cost the Treasury £1 million, £5 million, or f10 million. In this case, however, the Minister has no such argument. If he is to satisfy the fishermen he must show in what respects the case made by the hon. and learned Member for Kettering (Mr. Mitchison) is unreasonable. Instead of that we have had a jumble of platitudes in which the word "coherence" has been mentioned


several times. But we have had no definite, specific argument advanced in terms of pounds shillings and pence.
The fishermen in my constituency would understand if the argument were advanced that this would in some way ruin the Treasury. But that is not the argument. The fishermen see large concessions given to industry and agriculture—especially agriculture. Fishermen to whom my hon. Friend has referred are very critical of the considerable concessions given to the farmers. They say that if the farmers can get concessions what about the fishermen? They have never been able to understand the attitude that fishermen who take all the risks of weather and the hazards of fishing in the Clyde—which have been considerable, including the shortage of fish in the last few years—should not get the same concessions.
One of my hon. Friends who has left the Chamber asked whether there were any fish in the Clyde. The Clyde Fishermen's Association, of which my hon. and learned Friend and I share the honorary presidency, covers a considerable area and the fishermen go out to the Western Isles. When they see concessions given to industrialists and others for depreciation of plant, they ask, "What about the small fishing boats?"

Dr. Barnett Stross: I wish to correct the hon. Member. He said that the hon. Member who made that observation had left the Chamber. As it was my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith), and as he is still present, perhaps the hon. Gentleman would correct his remark.

Mr. Emrys Hughes: I apologise, because I have a great respect for my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith). I greatly appreciate his advice about the economics of Stoke-on-Trent, but I do not think that his knowledge extends to the fishing industry in the Clyde. Had his remarks been confined to the River Clyde it would have been different, but the hon. Member must realise that the Clyde is a big geographical area with fishing villages stretching from Ayr, Dunure, Girvan and Campbeltown. If my hon. Friend objects to the Clyde geographically, I will say

that it also affects the Western Isles and, therefore, his argument, although meant to be helpful, was not coherent in respect of its relevance to this particular Clause.

Mr. Ellis Smith: Very good.

Mr. Emrys Hughes: That is the best that I can do for my hon. Friend.
I ask the Committee not to believe that we are asking for an imaginary concession, in view of the fact that the River Clyde has been so polluted that fishing is no longer carried on in that area. Here we have a reasonable and coherent case for justice to be done to the fishermen. They are mobile. They would not catch any fish if they were not. They are members of an industry which is just as much productive as the Imperial Chemical Industry, or Unilever, or the motor car industry, or any other industry. The fishermen ask for fair play. Our fishermen, who did so well in two world wars to help the nation in its difficulties, are just as much entitled to a concession as the agriculturalists and industrialists.

Mr. Douglas Houghton: My hon. and learned Friend the Member for Kettering (Mr. Mitchison) is too disconsolate to reply. He was buoyed up by the hope that what was good for the hon. Member for Nottingham, South (Mr. W. Clark) would be good enough for him, but of course he was disappointed. Ministers have a habit of accepting Amendments moved by their hon. Friends and rejecting Amendments moved from this side of the Committee. Had my hon. and learned Friend been able to reply he would have found that he was between the devil and the deep blue sea, having been sympathised with in front and not entirely supported from behind.
Of course, the purpose of this Amendment was clear and, of course, we do not propose to include motor cars. This Amendment is not intended to open the gates to all mobile plant and machinery. It is designed to deal only with the fishing industry. For the life of me I cannot see any real difficulty in extending the concessions in Clause 38 to fishing boats whose normal home is a port in a development district. We shall have the opportunity in a few moments


of striking a blow for the men who go down to the sea in ships, or at least for some of them.
It is true that a fishing boat, after qualifying for this concession, might move off elsewhere, but on the whole these boats have a home port and stick to it. The families concerned are ashore in their home port and they are part and parcel of the life of the community in the area in which they live. I do not think there is any difficulty of administration or real possibility of avoidance. I suppose there will be moderate opportunities for getting the benefit of this concession without full justification in other directions, but we have to look broadly at what it is we are intending to do. If as a result of this concession there were more fishing boats and if there were more fish, more people would be employed in the industry. This would help those particular areas and do nothing but good.
We shall have to register our dissatisfaction with the reply by the Financial Secretary. My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) said that it was the most disappointing reply given so far in the course of debates on the Finance Bill. I perhaps have rather better reasons than my hon. Friend for confirming the fact, having heard most of the debates. I can assure my hon. Friend that he is quite right. If he had heard them all he could not have been

more emphatically right than he was a few moments ago.

The Financial Secretary said that this would run counter to the framework of the Clause—good heavens above, we have been running counter to something for the last two years. There is not a Clause in the Bill which has not run counter to something in Government policy when we proposed it. Never has there been a Bill so full of proposals moved by the Opposition at different times and so consistently rejected by the Government. They all are now in the Bill. Now we want to make them a little better we are told that they would run counter to the whole framework of the Clause.

Mr. Frederic Harris: Watch your blood pressure.

Mr. Houghton: We shall not trouble about the General Election that will he a foregone conclusion. In the face of all the evidence, how can hon. Members opposite buoy themselves up with this frothy optimism?
Getting back to the ships, if the Financial Secretary has nothing more satisfactory to say, I must advise my hon. and right hon. Friends to go more emphatically into the Division Lobby than is usual on the Finance Bill.

Question put, That those words be there inserted:․

The Committee divided: Ayes 164, Noes 224.

Division No. 118.]
AYES
[9.30 p.m.


Ainsley, William
Culien, Mrs. Alice
Hannan, William


Albu, Austen
Dalyell, Tam
Harper, Joseph


Allaun, Frank (Salford, E.)
Davies, G. Elfed (Rhondda, E.)
Hayman, F. H.


Allen, Scholefield (Crewe)
Davies, Harold (Leek)
Herbison, Miss Margaret


Awbery, Stan (Bristol, Central)
Davies, Ifor (Gower)
Hill, J. (Midlothian)


Bacon, Miss Alice
Davies, S. O. (Merthyr)
Hilton, A. V.


Baxter, William (Stirlingshire, W.)
Deer, George
Holman, Percy


Beaney, Alan
Delargy, Hugh
Hooson, H. E.


Bence, Cyril
Dempsey, James
Houghton, Douglas


Bennett, J. (Glasgow, Bridgeton)
Diamond, John
Hoy, James H.


Benson, Sir George
Edwards, Rt. Hon. Ness (Caerphilly)
Hughes, Cledwyn (Anglesey)


Blackburn, F.
Edwards, Robert (Bilston)
Hughes, Emrys (S. Ayrshire)


Blyton, William
Finch, Harold
Hunter, A. E.


Boardman, H.
Fitch, Alan
Hynd, H. (Accrington)


Bowden, Rt. Hn. H. W. (Leics, S.W.)
Fletcher, Eric
Hynd, John (Attercliffe)


Bowen, Roderic (Cardigan)
Foot, Dingle (Ipswich)
Irvine, A. J. (Edge Hill


Braddock, Mrs. E. M.
Foot, Michael (Ebbw Vale)
Janner, Sir Barnett


Bray, Dr. Jeremy
Forman, J. C.
Jeger, George


Broughton, Dr. A. D. D.
Fraser, Thomas (Hamilton)
Johnson, Carol (Lewisham, S.)


Butler, Herbert (Hackney, C.)
Galpern, Sir Myer
Jones, Dan (Burnley)


Carmichael, Neil
George, LadyMeganLloyd (Crmrthn)
Jones, Elwyn (West Ham, S.)


Castle, Mrs. Barbara
Ginsburg, David
Jones, J. Idwal (Wrexham)


Chapman, Donald
Grey, Charles
Jones, T. w. (Merioneth)


Collick, Percy
Griffiths, David (Rother Valley)
Kelley, Richard


Craddock, George (Bradford, S.)
Griffiths, Rt. Hon. James (Lianelly)
King, Dr. Horace


Cronin, John
Griffiths, W. (Exchange)
Lawson, George


Crosland, Anthony
Hale, Leslie (Oldham, W.)
Ledger, Ron


Crossman, R. H. S.
Hamilton, William (West Fife)
Lee, miss Jennie (Cannock)




Lever, Harold (Cheetham)
Pearson, Arthur (Pontypridd)
Swain, Thomas


Lewis, Arthur (West Ham, N.)
Peart, Frederick
Swinger, Stephen


Lubbock, Eric
Pentland, Norman
Taylor, Bernard (Mansfield)


Mabon, Dr. J. Dickson
Popplewell, Ernest
Thomas, Iorwerth (Rhondda, W.)


McBride, N.
Prentice, R. E.
Thompson, Dr. Alan (Dunfermline)


MacColl, James
Price, J. T. (Weathoughton)
Thornton, Ernest


MacDermot, Niall
Probert, Arthur
Timmons, John


McInnes, James
Randall, Harry
Tomney, Frank


McKay, John (Wallsend)
Rankin, John
Wade, Donald


MacPherson, Malcolm (Stirling)
Redhead, E. C.
Wainwright, Edwin


Mallalieu, J.P.W.(Huddersfield, E.)
Rhodes, H.
Warbey, William


Mason, Roy
Roberts, Albert (Normanton)
Watkins, Tudor


Mellish, R. J.
Roberts, Goronwy (Caernarvon)
Wells, William (Walsall, N.)


Mendelson, J. J.
Robertson, John (Paisley)
White, Mrs. Eirene


Millan, Bruce
Robinson, Kenneth (St. Pancras, N.)
Wigg, George


Milne, Edward
Rodgers, W. T. (Stockton)
Wilkins, W. A.


Mitchison, G. R.
Ross, William
Willey, Frederick


Monslow, Walter
Short, Edward
Williams, LI. (Abertillery)


Moody, A. S.
Silverman, Julius (Aston)
Williams, W. R. (Openshaw)


Morris, John
Silverman, Sydney (Nelson)
Williams, W. T. (Warrington)


Neal, Harold
Skeffington, Arthur
Willis, E. G. (Edinburgh, E.)


Noel-Baker, Francis (Swindon)
Slater, Joseph (Sedgefield)
Wilson, Rt. Hon Harold (Huyton)


Noel-Baker, Rt. Hn. Philip(Derby,S.)
Small, William
Winterbottom, R. E.


O'Malley, B. K.
Smith, Ellis (Stoke, S.)
Wyatt, Woodrow


Oram, A. E.
Spriggs, Leslie



Oswald, Thomas
Steele, Thomas
TELLERS FOR THE AYES:


Pannell, Charles (Leeds, W.)
Stones, William
Mr. Charles A. Howell and


Parker, John
Stross, Dr. Barnett(Stoke-on-Trent, C.)
Mr. Sydney Irving.




NOES


Agnew, Sir Peter
Eden, Sir John
Jennings, J. C.


Allason, James
Elliot, Capt. Walter (Carshalton)
Johnson, Dr. Donald (Carlisle)


Ashton, Sir Hubert
Elliott, R. W. (Newc' le-upon-Tyne, N.)
Johnson, Eric (Blackley)


Atkins, Humphrey
Emery, Peter
Jones, Arthur (Northants, S.)


Awdry, Daniel (Chippenham)
Emmet, Hon. Mrs. Evelyn
Kerans, Cdr. J. S.


Bainlel, Lord
Errington, Sir Eric
Kerby, Capt. Henry


Barber, Anthony
Farr, John
Kerr, Sir Hamilton


Barter, John
Finlay, Graeme
Kershaw, Anthony


Batsford, Brian
Fletcher-Cooke, Charles
Kitson, Timothy


Bennett, Dr. Reginald (Gos &amp; Fhm)
Forrest, George
Lagden, Godfrey


Berkeley, Humphry
Fraser, Rt. Hn. Hugh (Stafford&amp;Stone)
Langford-Holt, Sir John


Bingham, R. M.
Fraser, Ian (Plymouth, Sutton)
Leather, Sir Edwin


Birch, Rt. Hon. Nigel
Freeth, Denzil
Legge-Bourke, Sir Harry


Bishop, F. P.
Galbraith, Hon. T. G. D.
Lewis, Kenneth (Rutland)


Black, Sir Cyril
Gammans, Lady
Lilley, F. J. P.


Bourne-Arton, A.
Gardner, Edward
Lloyd, Rt. Hn. Geoffrey(Sut'nC'defield)


Box, Donald
George, Sir John (Pollok)
Lloyd, Rt. Hon. Selwyn (Wirral)


Boyd-Carpenter, Rt. Hon. John
Gibson-Watt, David
Longden, Gilbert


Boyle, Rt. Hon. Sir Edward
Gilmour, Sir John (East Fife)
Loveys, Walter H.


Brewis, John
Glyn, Dr. Alan (Clapham)
Lucas-Tooth, Sir Hugh


Bromley-Davenport, Lt.-Col. SirWalter
Goodhew, Victor
McAdden, Sir Stephen


Brown, Alan (Tottenham)
Gower, Raymond
McLaren, Martin


Buck, Anthony
Gresham Cooke, R.
McLaughlin, Mrs. Patricia


Bullard, Denys
Grosvenor, Lt.-Col. R. G.
Maclay, Rt. Hon. John


Builus, Wing Commander Eric
Gurden, Harold
Maclean, SirFltzroy(Bute&amp; N.Ayrs)


Campbell, Gordon (Moray &amp; Nairn)
Hall, John (Wycombe)
Maginnis, John E.


Carr, Robert (Mitcham)
Hamilton, Michael (Wellingborough)
Markham, Major Sir Frank


Cary, Sir Robert
Harris, Frederic (Croydon, N.W.)
Marshall, Douglas


Channon, H. P. G.
Harris, Reader (Heston)
Marten, Neil


Chataway, Christopher
Harrison, Col. Sir Harwood (Eye)
Matthews, Gordon (Meriden)


Chichester-Clark, R.
Harvey, Sir Arthur Vere (Macclest'd)
Maudling, Rt. Hon. Reginald


Clark, Henry (Antrim, N.)
Harvey, John (Walthamstow, E.)
Mawby, Ray


Clark, William (Nottingham, S.)
Harvie Anderson, Miss
Maxwell-Hyslop, R. J.


Clarke, Brig. Terence (Portsmth, W.)
Hay, John
Maydon, Lt.-Cmdr. S. L. C.


Cole, Norman
Heald, Rt. Hon. Sir Lionel
Mills, Stratton


Cooke, Robert
Hiley, Joseph
Miscampbeil, Norman


Cordeaux, Lt.-Col. J. K.
Hill, Dr. Rt. Hon. Charles (Luton)
Montgomery, Fergus


Corfield, F. V.
Hill, Mrs. Eveline (Wythenshawe)
Moore, Sir Thomas (Ayr)


Costain, A. P.
Hill, J. E. B. (S. Norfolk)
More, Jasper (Ludlow)


Courtney, Cdr. Anthony
Hirst, Geoffrey
Morgan, William


Craddock, Sir Beresford (Spelthorne)
Hobson, sir John
Morrison, John


Crawley, Aidan
Hocking, Philip N.
Nabarro, Sir Gerald


Crosthwaite-Eyre, Col. Sir Oliver
Holland, Philip
Nicholson, Sir Godfrey


Crowder, F. P.
Hollingworth, John
Oakshott, Sir Hendrie


Curran, Charles
Hope, Rt. Hon. Lord John
Osborn, John (Hallam)


Dance, James
Hopkins, Alan
Osborne, Sir Cyril (Louth)


d'Avigdor-Goldsmid, Sir Henry
Hornsby-Smith, Rt. Hon. Dame P.
Page, Graham (Crosby)


Deedes, Rt. Hon. W. F.
Howard, John (Southampton, Test)
Pannell, Norman (Kirkdale)


Donaldson, Cmdr. C. E. M.
Hughes Hallett, Vice-Admiral John
Partridge, E.


Doughty, Charles
Hughes-Young, Michael
Pearson, Frank (Clitheroe)


Drayson, G. B.
Hulbert, Sir Norman
Percival, Ian


du Cann, Edward
Hutchison, Michael Clark
Peyton, John


Duncan, Sir James
Iremonger, T. L.
Pickthorn, Sir Kenneth







Pilkington, Sir Richard
Shepherd, William
Tweedsmuir, Lady


Pitt, Dame Edith
Skeet, T. H. H.
van Straubenzee, W. R.


Pott, Percivall
Smith, Dudley (Br'ntl'd &amp; Chiswick)
Vane, W. M. F.


Powell, Rt. Hon. J. Enoch
Smithers, Peter
Vaughan-Morgan, Rt. Hon. Sir John


Price, David (Eastleigh)
Spearman, Sir Alexander
Walder, David


Prior, J. M. L.
Spelr, Rupert
Walker, Peter


Prior-Paltner, Brig. Sir Otho
Stanley, Hon. Richard
Walker-Smith, Rt. Hon. Sir Derek


Profumo, Rt. Hon. John
Steward, Harold (Stockport, S.)
Wall, Patrick


Pym, Francis
Stoddart-Scott, Col. Sir Malcolm
Webster, David


Quennell, Miss J. M.
Storey, Sir Samuel
Whitelaw, William


Rawlinson, Sir Peter
Studholme, Sir Henry
Williams, Dudley (Exeter)


Redmayne, Rt. Hon. Martin
Summers, Sir Spencer
Williams, Paul (Sunderland, S.)


Rees, Hugh
Tapsell, Peter
Wills, Sir Gerald (Bridgwater)


Renton, Rt. Hon. David
Taylor, Sir Charles (Eastbourne)
Wilson, Geoffrey (Truro)


Ridsdale, Julian
Taylor, Frank (M'ch'st'r, Moss Side)
Wise, A. R.


Roberts, Sir Peter (Heeley)
Taylor, Sir William (Bradford, N.)
Wolrige-Gordon, Patrick


Roots, William
Temple, John M.
Wood, Rt. Hon. Richard


Ropner, Col. Sir Leonard
Thatcher, Mrs. Margaret
Woollam, John


Russell, Ronald
Thompson, SirRichard(Croydon,S.)
Worsley, Marcus


Scott-Hopkins, James
Thornton-Kemsley, Sir Colin



Seymour, Leslie
Tiley, Arthur (Bradford, W.)
TELLERS FOR THE NOES:


Sharples, Richard
Touche, Rt. Hon. Sir Gordon
Mr. Peel and Mr. MacArthur.


Shaw, M.
Turner, Colin

Mr. Wade: I beg to move, in page 39, to leave out lines 17 to 20 and to insert:
(a) if and so long as, being within Great Britain, it is for the purposes of this Act a development district which is any locality designated by the Board of Trade as being a growth point for a region of high unemployment, or.

The Chairman: I think that it would be convenient for the Committee to discuss with this Amendment the Amendments in line 21, at end insert:
or
(c) if it is a county borough, borough or urban district in which or in part of which there is a substantial number of unemployed people
and in line 21, at end insert:
or
(c) if it is certified by the President of the Board: of Trade to be in a district in which the average level of wages is below the national average and which is suitable for light industry but has difficulty in attracting it".

Mr. Wade: This Amendment is designed to alter the definition of the areas to which the allowances under the Clause will apply. As the Bill stands, the free depreciation is limited to development districts as defined in the Local Employment Act, 1960, and before giving my reasons for moving this Amendment I should like to make what I consider to be two important points.
First, I accept the principle that some tax inducement for new investment in certain areas where there is underemployment is desirable. In fact, my colleagues and I have been saying this for some time. In 1961, the Liberal Assembly called upon the Government to introduce a scheme of taxation inducement for

new investment in regions of high unemployment, and on 16th November, 1962, in a speech at Glasgow, my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) called on the Government to introduce more favourable rates of write-off in areas of high unemployment. We have been pressing for this and, indeed, did so when the Chancellor introduced his proposals for bigger investment allowances for industry as a whole. We are, therefore, not discussing the principle but how that principle should be applied.
Next, I accept the view that I know the Chancellor holds—he made this point on Second Reading—that there is need for a clear definition of boundaries. The only question is what those boundaries should be, and whether the Clause's proposals should be restricted to development districts under the Local Employment Act, 1960.
There are certain objections to development districts as defined in that Act, which is intended to remedy high unemployment. In theory, the designation of a district could be applied to an area where there is likely to be considerable or high unemployment but, in practice, this procedure is applied only where there has been a high rate of unemployment—in other words, where unemployment has for some time been considerably above the national average.
That being so, I think that the procedure under this Clause will tend to be one of plugging up holes. The provisions of the Local Employment Act are brought into operation with a view to reducing the level of unemployment but, as soon as


this is achieved, the area promptly loses its status as a development district, even though the deeper causes of the unemployment may remain unaltered, as has happened in several cases—for example, on Merseyside. An area can appear on and disappear from the list of development districts, and that seems to be the flaw in the proposal to rely on development districts for the purposes of this Clause.
The definition would be a fluctuating one. We all agree that the boundary should be clearly defined, but the areas to which these provisions may be applied will be constantly changing. Businessmen like to make their long-term plans, and the Clause as it stands would mean that the business community would be in some uncertainty. On the whole subject of the need for regional development, Lord Eccles' speech in another place on 28th November, 1962, has been referred to on other occasions, and I should be out of order to quote from it, but I can give the gist of his remarks.
He said that he had a confession to make in that he had changed his mind since he had had to do with the Local Employment Act at the Board of Trade. At that time, apparently, he regarded the whole operation as a kind of rescue service, but he now recognised that the time had passed for minor developments and he felt that something much more radical and long-sighted was needed. I should have thought that that was very true, because what is needed is a more balanced pattern of economic growth for Britain.
9.45 p.m.
We must ask ourselves whether this is likely to be achieved if we are tied to the Local Employment Act. This is quite an important issue and I am restraining myself in being very brief, but the proposal in the Amendment is that the district designated as a region should be one where the encouragement of economic growth is required in an area which may be larger than a development district. It does not follow that boundaries need not be clearly defined. Indeed, it is important that they should be, but I do not think that there would be the changing and chopping about that is probable under the provisions in the Bill. It would accord with overall development

planning, and it is essential that we should have a properly thought out regional development.
This is not only my own view. There are many authorities in favour of it and I would quote from the National Economic Development Council's publication "Conditions Favourable to Faster Growth", in which after referring to the narrow definition of development districts in the Local Employment Act, the Council states in paragraph 95:
But it is arguable that better results might be secured for the slowly expanding regions as a whole by identifying their natural growth points and seeking to attract industry to them. Within the bigger areas a wider choice of location than at present would be available to incoming firms. This would increase the likelihood of attracting a larger number and a greater variety of firms, and of stimulating the development of industrial complexes. Firms would then benefit from the presence of kindred industry. These complexes and other places especially attractive to industry could be developed into growth points within the less prosperous regions. It could be expected that the benefit of new growth in any part would repercuss fairly quickly throughout the region.
I should have thought that in applying this new concept of free depreciation it would have been helpful, and certainly would have resulted in more far-reaching benefits, if a wider area, as suggested in the N.E.D.C. Report were designated rather than that we should be tied to the Local Employment Act. This, briefly, is the object of the Amendment.

Mr. Simon Wingfield Digby: The effect of my Amendment in page 39, line 21 can be explained fairly briefly. It is to extend this fairly generous allowance, which might be said to be to the point of abandonment if it were not a curious thing to say in connection with the Treasury, to other deserving areas, namely, those with a very low wage level.
Under the Bill as it stands, the only test, as I understand it, is the level of unemployment. There are not taken into account other considerations such as the location of industry, rural depopulation, or the size of the average wage packet, which has a very big effect on the general life of an area and the choice of jobs open to young people when they leave school.
I should be the last to dispute the great need of areas of heavy unemployment, and I am thankful that my con-


stituency is not one of them. No one would grudge a great deal of help to them. However, we have seen in Bridport the closing of the Brit Engineering Works and the closing of a fishmeal and fertiliser factory, a new factory recently set up there. These closures cause unemployment, but I am well aware that there is no chance of my constituency becoming a development district within the meaning of the Act. Indeed, there seems to be no time when a constituency like mine is likely to get help. When there is full employment, we benefit to a certain extent from holidaymakers coming from the industrial areas, but we do not gain exceptional help.
In answer to a Question the other day, the Parliamentary Secretary to the Board of Trade said that £607 was being spent per new job in the development districts. This is substantial help. A very small proportion of it would be welcome in many of the rural areas of Dorset and elsewhere. We need more light industries, but to attract them there, without very much encouragement from the Board of Trade, if I may say so, we need inducements to the firms which we wish to bring in. These inducements are not available yet.
But there is the further danger now, as I see it, having regard to the generous allowances being applied in other parts of the country, that firms which we seek to attract to areas like mine will now wish to go to the North-East or elsewhere. Once again, therefore, we shall not profit.
Our younger people leaving school will have a very limited choice of jobs open to them. There are few jobs carrying very good wages. It would be a sad reflection if we had to wait until we were struck down by serious unemployment and became a development district before we could have assistance to the better balance of industry which we greatly need in many rural areas. I hope that, if my right hon. Friend is unable to accept this Amendment, he will bear in mind the needs of constituencies such as mine. Although we appreciate the greater needs of the industrial areas today, we hope that our turn will come.

Mr. Ellis Smith: On behalf of my hon. Friends, I now put to the Committee

the case for the Amendment, in page 39, line 21, at the end to insert:
or
(c) if it is a county borough, borough or urban district in which or in part of which there is a substantial number of unemployed people".
I shall make as reasoned a case as I can, supported by concrete evidence and official statistical information. I shall call in aid the Local Employment Act, but, at the same time, complain about the lack of uniformity in its administration. All these matters are involved in the Clause which we now seek to amend.
The Government have recently announced many concessions to certain regions of the United Kingdom. These concessions are superimposed on the preferential treatment which some of these areas are already receiving. The purpose of the Amendment is to bring about equality of treatment and uniformity in other similar areas.
May I give some official statistical evidence in support of the Amendment. According to HANSARD, on 8th April, 37,936 people were unemployed in Wales. Wales receives the benefit of all the concessions and will now receive the benefits of the Clause. On the same day, 114,199 people were unemployed in the whole of Scotland, which receives all of the concessions and preferential treatment and will now receive the benefits of the Clause. There were 62,809 unemployed people in the north-east region, which receives all these concessions and preferences plus special Cabinet attention. According to yesterday's Observer, there will be superimposed on that further preferential treatment which a noble Lord in another place proposed to introduce.

Mr. William Ainsley: Out of five districts in my constituency, one is not vet scheduled, and it is the worst hit in the whole constitutency. But, because it comes in the Durham area, which is the administrative centre, the miners in that area are not taken into consideration. Therefore, that area gets no financial assistance. That is the problem which we face in the North-East.

Mr. Ellis Smith: That provides further evidence of the correctness of the reasoned case which I am presenting.

Mr. Grimond: I have listened with great interest to what the hon. Member has been saying and do not dissent from it. However, I am sure that he does not wish to mislead the Committee. He said that the whole of Scotland was getting benefits under the recent legislation, but that applies only to development districts in Scotland, which do not make up the whole country.

Mr. Gower: The hon. Gentleman also gave the impression that the whole of Wales was receiving these benefits. He must be aware that only a very small part of Wales gets them.

Mr. Ellis Smith: I welcome these interventions, because it is most important that in stating our case we should be as accurate as we possibly can. In my view, our case is so strong and so unanswerable that the more corrections of that kind that we have the better. I should have thought that it was obvious that, when I mentioned Scotland, I was referring to those parts to which the Local Employment Act applies. I should have thought that when I mentioned Wales it was obvious to students of affairs that I was speaking about where the Act applies there.
I ask all hon. Members who have been good enough to listen to these statistics to compare them with the figures which I shall now give. On the same day, 8th April, there were 139,713 unemployed within a 50-mile radius of where I live. There were 5,000 unemployed in the area of Stoke-on-Trent, 2,900 unemployed in Salford and 12,500 unemployed in Manchester. Relatively speaking, Britain obtains more output and exports more from these areas than from any other area. The density of population in these areas is probably the greatest in the world. All the other areas to which I referred a few moments ago receive these preferences, but these areas, in the main, receive no concessions at all.
10.0 p.m.
We want equality of treatment for similar areas suffering in this way. We want to replace the regional administration of the Local Employment Act by national administration. That is one of the purposes of the Amendment. At the same time, we want the Chancellor—there is no one better informed than he is on this matter, because he introduced the Bill which is now an Act—to provide

uniformity of administration of the Act. We want to encourage the export trade areas and not discourage them. We want to encourage our industrial towns and cities and not discourage them. We want to keep down the costs of production and at the same time keep down the price of exports. All this is involved in the Amendment.
The towns and cities for which we are speaking have poured out for generations mountains of production and exports. We have lived all our lives in the most polluted area in the world. We live near tips and pit heaps. Our houses and buildings suffer from mining subsidence and our land has been spoiled and blighted industrially for generations. Unless the Amendment is accepted, we shall now suffer because of the density of our population.
Never was a stronger case made during consideration of a Finance Bill than that which we are now presenting. I give an example of the kind of thing that has given rise to the need for this Amendment. A crying child gets most attention, and in certain parts of England we have not cried enough. In 1927, Stoke-on-Trent wanted greater diversification of industry within the city. It gave concessions and facilities before ever the Government thought about them, and I am not speaking of this Government. It encouraged the Michelin Tyre Company, by granting it facilities and concessions, to come to our city. We have ever been grateful for that because it has provided employment for thousands of people. The management was French. I have cause to remember that management because after years of struggle and sacrifice by the workers in the area, with the special support of three aldermen in particular and Ernest Bevin, the industrial relations there now bear favourable comparison with the best in the country.
The Michelin Company looks upon the area with pride. It takes pride in its output. It wanted to build a large new extension within the city. The city council welcomed the proposal. The organised workers wanted it. The Board of Trade resisted it and insisted that the extension should not be made in the city, not even in North Staffordshire. The extension had to be stopped and the new factory was built at Burnley.
We looked on that with great sympathy. As a resuit of research and enterprise and good output and very fine industrial relations, another new extension was proposed by the Michelin Company in our city. The Corporation was delighted, and my hon. Friends and I were pleased because at that time we had 5,000 unemployed. But the Board of Trade would not allow a brick to be built. It upset the Michelin Company and it upset the Corporation; and the second extension is now being built in Belfast. This would have provided employment for 3,000 of our 5,000 unemployed.
I ask the Chancellor whether that is fair to our city. Have we to suffer through the Michelin Company's enterprises being taken elsewhere when we have 5,000 unemployed of our own? Is it good business? Is it encouraging exports? Extensions have been allowed to take place all over the country. There have been extensions in Uttoxeter, Trafford Park, Leicester and many places in the south of England. I have documentary evidence to prove this if anyone doubts it. But not a brick has been allowed to be built in the City of Stoke-on-Trent.
This is the reasoned case for my Amendment. I hope that the Chancellor, who has been good enough to listen to the case as it has been presented, will look upon the Amendment now more sympathetically and consider whether he will accept it. I now beg to move it.

The Chairman: The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) has just said that he was moving his Amendment. I want to avoid there being any misunderstanding. I think that it is understood by the Committee that I called the Amendment to line 39, to leave out lines 17 to 20 and insert the words on the Notice Paper when we began this debate, and I also said that it would be possible to discuss at the same time two Amendments to line 21, but neither of those Amendments will, in fact, be moved.

Mr. Gower: As several hon. Members have stated, the benefits which are now to be given to the development districts are exceptional. The term "exceptional" has been used by several speakers, including my hon. Friend the Member for

Dorset, West (Mr. Wingfield Digby). For that reason the Chancellor has deemed exceptional incentives of this nature to be essential to solve the problems of the areas which are most in need of special help.
I should have thought that the danger which we must avoid is that if we spread these real benefits too widely we may arrive at a position where we shall not bring the help to the areas where it is really needed. The more these benefits are increased and improved, the more will the areas which are outside the development districts covet similar assistance. That is human and natural. But there is a serious risk that if we extend the areas too far we may fall into the other danger.
The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), for example, referred to a county borough or urban district in which there is a substantial number of unemployed people. I respectfully suggest to him that one may have a large county borough with a substantial number of unemployed, but that that number may, nevertheless, be a very small proportion of the total population there; and I should say that it would be a rather inept formula merely to judge by number in such an area. I think that the proportion formula which is used at present is much more appropriate.

Mr. Harold Davies: This is the pathetic belief that human beings are merely figures on a multiplication table rather than flesh and blood. If 384 people are 5 per cent. of population X or 384 are only 0·5 per cent of population Y, they are still 384 people who need help.

Mr. Gower: I accept that point, but 384 people in a large population are much more likely to be absorbed into existing industry, whereas 384 people in a sparsely populated area may be a very large proportion of the existing population and, therefore, the difficulty of absorbing them will be all the greater.

Mr. Harold Davies: I grant that, but I am tired to death of the Treasury and everybody else treating human beings as statistics or little dots on a piece of paper.

Mr. Gower: If the hon. Gentleman had his way the people who need help most would not receive it.
The hon. Member for Huddersfield,


West (Mr. Wade) rightly pointed to the importance of consideration for probable growth trends. My recollection is that in the Local Employment Act it was laid down that trends would be part of the formula by which development districts would be assessed. Probable trends in unemployment are among the things the Board of Trade can take into account.

Mr. E. G. Willis: It does not do so.

Mr. Gower: Then the hon. Gentleman is claiming that when we enact something it is not being carried out. That is not so. Probable trends are taken into account.

Mr. William Ross: It is much more than a trend which is taken into account. I believe that the words used in the Statute are "imminent, high and persistent".

Mr. Gower: Some degree of persistency is surely necessary to merit the exceptional assistance provided by the Act, otherwise it might go to an area where there was purely transitory unemployment.

Mr. Willis: I can give the hon. Gentleman a specific example. It is the notorious case of the situation in Bathgate, Scotland. Bathgate was scheduled and then got a factory. It was then deschcduled. Another industry closed and the district was scheduled once more. That is the kind of "watching" by the Board of Trade which the hon. Gentleman is talking about. It is lunacy. It is not planning.

Mr. Gower: The hon. Gentleman is strengthening my case. The effect of what he says is that even under the Act it is difficult enough to provide this help to the areas which need it most, but that if we extend such areas and make them more and more ill-defined help will be longer delayed.

Mr. Stephen Swingler: There is nothing in our Amendments which would subtract from the help given to development districts. Our purpose is to suggest that these concessions be granted on a bigger scale, more widely and in a more discriminating way. The question we are raising is whether the concessions in the Clause are merely a sop at the moment to areas

of particularly high unemployment—a short, sharp shot in the arm—or whether they are really a part of a policy for a more efficient deployment of British industry throughout the country. It appears at the moment, however, that the concessions are something of a sop in the year before the General Election.
What we are concerned about is that the concessions with which we agree, should be provided together with a policy of economic planning in a redistribution of British industry, and should be operated more flexibly both by the Treasury and the Board of Trade in order to deal not merely with areas which now have high unemployment but also with those which, unless something is done, will inevitably become the development districts or distressed areas of the future.
10.15 p.m.
One can easily shift unemployment about the country. That can be done through present-day economic policy. In North Staffordshire we have experienced and are experiencing part of this problem. Miners in the expanding coal mining industry of the West Midlands have agreed to accept an increasing number of incoming miners from other districts, many of whom have settled in ray constituency and other parts of the West Midlands, and they have done this to assist their comrades from Scotland, South Wales and other areas where pits are being closed. One of the things which that has inevitably meant is a stoppage of local recruitment for coal mining. There are not the jobs which would otherwise be available at the employment exchange for people in the locality.
In an area like North Staffordshire, where the other principal industry, pottery, has been steadily contracting for many years, a contraction which has been somewhat accelerated by the Government in the last few years, this has been a serious problem, and in parts of the area which my colleagues and I represent the proportion of unemployment has been brought very near to the figure which would qualify the area for inclusion in the list of development districts.
If this policy continues, by shifting the population from one part of the country to another because of the closure of industry in one area, the unemployment problem could easily be thrown up in


another area which in a few years, because of the stoppage of local employment prospects, would belly-ache to the Board of Trade to be scheduled as a development district. Is that a sensible policy?
What we are saying is that there should be some discrimination in the distribution of these concessions, just as we have been pleading with the Board of Trade for some discrimination in the granting of industrial development certificates in order to foresee the unemployment problem before it occurs and before the redundancies arise and there is a succession of factory closures. When it: is known that in certain parts of the country over a number of years certain important industries will contract for technical reasons, or because of change in overseas markets, there should be a policy of attracting new industry and diversifying that in the areas.
Such a policy would be sensible fiscally and economically, because it would prevent the unemployment problem from arising in two or three or five years. If these concessions are applied merely to areas which now have high unemployment, while they may well be assisted—and we hope that they will be—the only result may be, especially with the continuation of present policies, that other areas of high unemployment will appear because the policy has not been applied with sufficient discrimination and foresight.

Dr. Stross: It is natural for hon. Members to think specifically in terms of the problems of their own constituencies, or the parts of the country in which they five, but we recognise that the Government must think in terms of the country as a whole.
When my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) spoke specifically of the grievances of the City of Stoke-on-Trent and the way it has been treated, it did not mean for a moment that he or I or any of us in North Staffordshire would not accept the principle that it is right for the strong to help the weak and for the Government, wherever possible, to ensure that industry moves into those areas where the Government believe it to be most needed.
None the less, having said that, I illu-

strate my belief in it by saying that I would not have lifted a finger to keep the Michelin extension from Burnley and in Stoke-on-Trent, knowing what was happening in Burnley at the time, how many factories were closing, how high was the unemployment rate, and how necessary a plant of this type was to Burnley. The Michelin Company did not want to go because it would have been much more convenient to extend on the site where it had had a great factory for many years.
When the time came to make a second extension, this was done in Belfast. Everybody knows that Belfast needs new industries, but at that time one of the greatest aluminium producing factories in Stoke-on-Trent, the first of its kind in the country, although still making handsome profits, decided to close, and as a result hundreds of men were due to lose their jobs.
The Chancellor of the Exchequer has been President of the Board of Trade and he knows more about this kind of thing than we do. He has to make the decisions and think about these problems, but someone who has been both President of the Board of Trade and Chancellor of the Exchequer does not always know the special circumstances which exist in individual areas, cities, towns, county boroughs, or districts.
I shall not keep the Committee long, but I wish to point out why the manufacturers of pottery should have the benefits referred to in the Amendment. In the pottery industry machinery is needed to make the pottery, but there must also be machinery, which must be continuously improved and kept up to date to protect the health of the workers. I am speaking now of the dust extraction plant that is necessary to prevent pneumoconiosis. Despite all that we have done, some factories have not done all that they could to protect the health of their workers.
Out of the 20,000 workers in the dusty part of this industry, between 80 and 100 die from pneumoconiosis every year. This is an abominable state of affairs and it is strange that, while we can put a man into space and enable him to circle this planet 22 limes and bring him safely back to earth, we cannot ensure that the air in our factories is clean


enough to prevent people dying before their time.
There is appreciable unemployment in Staffordshire, and the plant and machinery used in the pottery industry is expensive. I therefore make a plea for these benefits to be given to manufacturers as an incentive to ensure that machinery is provided to protect the

workers, and that there is never any breach of the pottery regulations. Perhaps my argument is not as good as it should be, but we who live and work in the district and represent the people there are very sympathetic to those who work in dusty, hazardous occupations. This includes not only the potters, but the miners.

Mr. Harold Davies: I do not wish to detain the Committee for very long, but let us consider what we are asking the Government to grant, and why the Government are not prepared to concede it.
The Clause is headed:
Annual allowances for new machinery and plant in development districts.
Subsection (5) says:
A district shall be treated as being a development district within the meaning of this section—

(a) if and so long as, being within Great Britain, it is for the purposes of the Local Employment Act, 1960, a development district as defined by section 1(2) of that Act,or
(b) if it is within Northern Ireland,"

and we propose to add:
or
(c) if it is a county borough, borough or urban district in which or in part of which there i3 a substantial number of unemployed people".
We think that this is a constructive Amendment because, as my hon. Friend the Member for Newcastle-under-Lyme (Mr. Swingler) said, it is looking to the future.
Anybody who read The Times publication on science and technology last month would see that the old traditional crafts, like the enamel industry, are de-dining. This is not just empire-building for north Staffordshire; this refers to the whole country where, instead of a whole area being taken as a development district where there is incipient unemployment, small areas, as in the case of Milton in Stoke-on-Trent, where an aluminium factory is closing down and going to Scotland, should be accepted. We are glad that it is going to help Scotland, but with a little planning foresight this factory could be used for the plastics industry, or something else, if machinery development allowances were made under the Bill for a small area, or city or borough, just as for a development district. That could be made to apply to the whole country before unemployment spread lo larger areas.
When we know that unemployment is coming, as in the case of Milton, why cannot we make this provision apply to smaller units of population? Local authorities in my area, in the urban dis-

tricts of Kidsgrove, Cheadle, Leek and Biddulph, are trying to encourage new industries to come in. Although some of the old mines are being closed in our area, new ones are being developed. We welcome the miners who have come from Durham, Scotland and south Wales to the prosperous west Midlands coalfield area, but there is now less employment in the local pits for the young people who traditionally go into them. Now there is also contraction in the pottery industry.
Last week I asked the Minister of Agriculture to give me the comparable figures of small farms of 30 acres or less in north Staffordshire in 1952 and 1962. I do not want to weary the Committee by reading the table which the Minister gave me, but it showed that there are now 300 fewer small farms in the rural areas contiguous to and embracing Stoke-on-Trent than there were in 1952.
According to Barclays Bank Economic Review for May, for every two people working on the land three subsidiary people are employed. In the agricultural area surrounding Stoke-on-Trent there is a dwindling rural population. The Government ought to use their foresight in order to prevent this happening.
We think that the Minister could find a satisfactory formula. Very soon in my area we are opening a reservoir, and we are taking electricity to rural areas. All this could be done by nationalised industry. The development that is going on in The Peak planning area should get the benefit of this allowance because it would help some of the unemployed farm workers and small farmers. The National Park project prevents some of the farmers in my area from taking electricity, because it is said that the poles carrying the current would destroy the beauty of the countryside, and that the electricity supply must be taken underground, by cables.

The Chairman (Sir William Anstruther-Gray): The hon. Member is straying a little from the terms of the Amendment.

Mr. Davies: I consider that electricity is concerned with power and with plant. If the cable is taken underground to the farmer or to the industrialist for the purpose of operating machinery, if an allowance is provided in The Peak planning


area we might still be able to get electricity into areas which cannot take it at the moment because people who never go there except on Sundays say that it destroys the beauty of the countryside.
I hope that the Minister will examine some of these arguments and will find a formula to allow the Treasury to look favourably on the granting of concessions to these areas which need expanding industry in small units.

10.30 p.m.

Mr. William Hamilton: The basic point of the Amendment is to try to spread the jam a little more thinly.

Mr. Harold Davies: And get more of it.

Mr. Hamilton: It will not be accepted because it runs contrary to the original purpose of the 1960 Act, which was designed to spread the jam less thinly. Currently the percentage of the insured population covered by the Act is 13 per cent. against a figure of 20 per cent. before the Act was passed. It was the declared purpose of the Government to restrict their assistance in order to make it more effective. That has been a dismal failure.
The figures for Scotland show that the percentage rate of unemployment in the development districts in April, 1960, was 7·1 per cent. Today it is 7·4 per cent. In other words, after three years and after the estimated expenditure of £45 million in Scotland, we have a worse unemployment position in the development districts than at the outset. That is why there has been no great outcry from areas which were not development districts. We speak from bitter experience. In Scotland we have lost as many jobs as we have gained under the 1960 Act.
The reason why the concessions are now being made in the Finance Bill and the reason why new employment legislation is under way in the House of Commons is that the Government have belatedly recognised the complete failure of the provisions in the 1960 Act. As the date of the General Election gets nearer, they are introducing more incentives to drive industry into the development districts. And it will

work—make no mistake about it. That is why there are squabbles going on, because it is vitally important to get on this wretchedly unscientific list of development districts. That is why my hon. Friends are manoeuvring to find a form of words in order that their areas may be scheduled as development districts. But the Board of Trade has said "No. We have this figure of 41 per cent. We do not know where we got it, but it happens to give the right answer to the question which we put to ourselves, which was, ' How can we reduce the coverage from 13 per cent. of the insured population?' And the figure we arrived at was 4½ per cent." The Parliamentary Secretary did not know that at Question Time a few weeks ago, but he must know it now. This is the figure administratively. It is not in the legislation, but the Board of Trade work on that figure administratively.

The Parliamentary Secretary to the Board of Trade (Mr. David Price): indicated dissent.

Mr. Hamilton: Does the hon. Gentleman contradict that? I see that he is shaking his head.

Mr. J. J. Mendelson: Tell us the figure.

Mr. D. Price: The hon. Member for Fife, West (Mr. W. Hamilton) is, as usual, misinformed. I ought to know what I am trying to run.

Mr. W. Hamilton: The hon. Gentleman will see next week that he is wrong.

Mr. Lubbock: Why does not the hon. Gentleman ask him to name a district where the unemployment rate is less than 4½ per cent. and which is scheduled?

Mr. D. Price: Darlington.

Mr. Hamilton: I did not say that. The hon. Gentleman cannot get out of this. Administratively the Board of Trade works to a figure of 4½ per cent. He denied that at the Box several weeks ago, but that is the figure.

Mr. D. Price: The hon. Member must not talk as if he were a Board of Trade Minister. I do know what happens at the Board of Trade.

Mr. Hamilton: I doubt whether the hon. Member does; it is clear that he does not. He will see next week. I say no more than that.
Now that we are getting these quite considerable concessions for the development districts it is increasingly vital for my hon. Friends who are perturbed about the numbers of unemployed in their areas to try to get this help. They have sought to get a form of words which will include their areas. This is not the answer to the problem; the answer is overall expansion. So long as we get limited investment opportunities and lack of optimism and confidence in industry as a whole, whatever incentive is given we shall not have enough to go round. That is why we should use the N.E.D.C. much more.
The N.E.D.C. has produced two valuable Reports which have concentrated on growth industries. Why does the Board of Trade not use N.E.D.C. to take a look at areas with declining industries? If it can forecast for growth industries and what percentage of growth there will be over the years, why can it not estimate the decline in areas which are troubled with this problem, instead of choosing an arbitrary figure of 4½per cent. and then scheduling and descheduling?
An hon. Friend has mentioned Bath-gate. We could mention Llanelly and a whole number of places where people do not know where they are because of all these changes. A firm builds a factory with assistance and, when it decides to build an extension, it finds that the district has been descheduled. All these problems show the limitations of the Act. The right hon. Gentleman should have foreseen these things instead of going round the map and making it look as if it had measles with so many little development districts. Of course, my hon. Friends will exert pressure. The right hon. Gentleman should have foreseen that pressure would be exerted. His is not the answer. It is to be found in a policy of expansion which the right hon. Gentleman has been afraid to follow until far too late.

The Chancellor of the Exchequer (Mr. Reginald Maudling): This, of course, is one of the most important features of the whole Finance Bill and I think it was right that the Committee should have a thorough discussion, because it is both

touching on a very important matter and also introducing a quite novel principle in our taxation system.
I agree with the hon. Member for Fife, West (Mr. W. Hamilton) that basically the problem of unemployment, both in the development districts and elsewhere, depends upon the general expansion of the economy. I am sure, therefore, that he will welcome the production index figures for March which appeared on the tape this afternoon, before any of the effects of the Budget has taken place, and I hope that he will be encouraged when the next unemployment figures appear.
Leaving aside that general principle, the simple fact is that we are in this Measure, as in previous Measures—I think with the support of the House in the past—deliberately favouring certain areas at the expense of others. This is a deliberate policy of discrimination just as all policies designed to encourage development in one district rather than in another are policies of discrimination. Of course, if we make a discrimination greatly to increase a benefit going to certain districts, other people who are left out feel worse done by. As I said in my Budget speech, that cannot be avoided. We are making a very big increase, by the free depreciation, new standard benefits and other measures, in the help which we are giving to areas of high unemployment. I am glad that the hon. Member for Fife, West recognised that these would be effective, and I am sure that for once he is right.
As I said in the Budget speech, the introduction of these new and powerful incentives to investment in the development districts is bound to create problems of demarcation, to increase the obvious disparity between one district and another and to emphasise the importance of drawing a clear line. They are attempts, as are all policies of distribution of industry, to influence the location of industry contrary to what would be normally determined on purely commercial considerations.
The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) was right to call attention to the importance of the export trade, because there must be limits to the extent to which we can properly and sensibly distort the normal commercial pattern of the distribution of investment


in the country. We must have very strong and clear reasons for discriminating in this way between one district and another.
Several criteria have been advanced, for example by my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby), but the only practical criterion is the percentage of unemployment in an area. The hon. Member for Leek (Mr. Harold Davies) rightly said that if a man is unemployed it means the same to him wherever he is, but if he went on that principle there would be no discrimination, no development districts and no policy—and no progress.
The hon. Member for Stoke-on-Trent, South referred to the number of unemployed in absolute terms within 50 miles of his constituency. Within 50 miles of the Palace of Westminster there would be an even greater number of unemployed in absolute terms simply because of the vast population. This cannot be considered on the basis of the absolute number in any area but must be considered on the basis of the percentage of the working population unemployed in an area. I think that both for social and for economic reasons this is right.

Mr. J. T. Price: I and my hon. Friends have for some time been trying to get a coherent picture of the criteria which are required for this discrimination about which the right hon. Gentleman is speaking, There are parts of my division in which the unemployment level has been persistently about 6 per cent. of the insured population, and the Board of Trade and his Department have refused to do anything about it. I refer to the township of Hindley in Lancashire and parts of the Wigan rural area, where unemployment has been persistently at a high level and to which none of the steps to which the right hon. Gentleman has referred have been applied. What has he to say about that?

Mr. Maudling: I was coming to this point by saying that for both social and economic reasons the percentage of unemployment in an area is clearly what matters, socially because it is the percentage of unemployment which affects the whole structure, fabric and life of the area, and economically because we cannot have a fully expanding economy in circumstances in which full employ-

ment in one area leads to a shortage of labour in another. We must have greater uniformity of the percentage of unemployment.
The criterion is clearly set out in the Local Employment Act. It is "a high rate of unemployment" which exists "or is to be expected"—and the hon. Member overlooked this point—
within such a period that it is expedient to exercise the said powers and … is likely to persist, whether seasonally or generally".
I think that the Committee will find that this says in rather more precise terms what is said in the Amendment which was not moved by the hon. Member for Stoke-on-Trent, South. In other words, it is the criterion of unemployment. In the 1960 Act we said in precise words the criteria which should be applied. I know that in the administration of a Statute there are often problems which arise and arguments which take place, but we are concerned at the moment with the wording of a Bill and not with its administration, and nothing has been advanced this evening in the way of altering the present law and improving the administration of that law. I think that it is administered fairly, impartially and effectively. As my hon. Friend the Member for Barry (Mr. Gower) pointed out, the law as it stands is quite clear as to what criteria should be applied.

10.45 p.m.

Mr. Wade: On the point of the law as it stands, would not the Chancellor agree that, in practice, development districts have been designated as a result of high levels of unemployment, but not in anticipation of those levels? Even if it were true that one could consider the possibility or risk of the level of unemployment rising, within the terms of the Local Employment Act the Chancellor would surely not be entitled to designate the sort of area referred to in the N.E.D.C. Report as having a wider choice of location and as a growth point, for does not that go beyond the terms of the Act?

Mr. Maudling: It has been my experience of the Board of Trade and subsequently that, in fact, the designation of areas as development districts has taken place in advance of high unemployment because it has been apparent that that was going to happen.
I think that there is a certain misunderstanding here. I do not think that there is the conflict between the growth point concept and the development district concept that is sometimes supposed. There are, of course, arguments on both sides, but we must be prepared to develop our ideas as the thing evolves. It is sensible to encourage industries to go to places which are attractive to them from the point of view of transport, and so on. On the other hand, if they are a long way from the places of unemployment that will not solve our unemployment problem.
In our development of these policies we must think of the growth concept and of helping existing towns which are threatened with decline unless their unemployment problems are tackled. If hon. Members look at the areas which are laid down as development districts they will see that they are wide areas. In this connection, the hon. Member for Fife, West spoke of "measles areas", but would he regard the Scottish development districts as "measles areas", or the whole of Northern Ireland? The whole of Northern Ireland is treated under the Bill as a development district. Wide areas are covered, including, for example, Glasgow, and the new town of Livingston.
If the Committee will consider the practical problems it will see that there is not, in practice, a conflict between the growth point concept and the concept of providing employment for people in those areas where unemployment exists.

Mr. Ainsley: Why did the President of the Board of Trade, in consultation with the Minister of Labour, put the whole Tyneside area into one employment exchange area for benefit under the Local Employmnt Act, leaving out one special part of the North-East—the Brandon Urban District Council area in mid-Durham—which forms the blackest spot for unemployment in the North-East?

Mr. Maudling: The administration of the Act is a matter for the President of the Board of Trade, but the change in Newcastle was based on the facts concerning travelling to work in that area. The facts were that, in modern conditions, it was sensible to treat the area

as one unit. It is obvious that it is on a local employment exchange basis that the Act must be administered.

Mr. Ross: Will the right hon. Gentleman apply that thinking in future to Kilmarnock and Ayrshire, for example, particularly when within a travel-to work area one gets more unemployed people outside the scheduled development district than inside it? Will the right hon. Gentleman remember that many of the people registered as unemployed inside the scheduled district became unemployed because of events in an area which was not a scheduled district?

Mr. Maudling: I am certain that my right hon. Friend will bear these points in mind. My hon. Friend the Parliamentary Secretary is here and will, I am sure, have taken note of what the hon. Member has said so eloquently.
To sum up on the Amendments, these are obviously very important points. I admit that introducing the principle of free depreciation, which is an entirely novel and powerful incentive, clearly creates new problems of administration as it goes along. I shall watch this in practice, but one must stick to the point that if it is to be effective then, as my hon. Friend the Member for Barry said, we must not spread it too widely. We must concentrate those plans where help is most definitely needed and for administrative purposes must have clear lines drawn. The Committee therefore would be wise to accept the Clause as it stands. If in development and experience we find that changes are needed we shall make them.

Mr. Houghton: I know that the Committee will not wish to be delayed unduly, although by general assent the Committee realises how important the Amendments are against the background of one of the most important Clauses in the Bill. We are, of course, discussing taxation and, as the Chancellor of the Exchequer has said, we are establishing a new principle in our system of taxation. Although in the past we have given special inducements to industry to go into local employment areas, this is the first time that the Government have proposed to add to existing concessions by giving special taxation facilities for those who go into those areas.
We have maintained for a very long time the principle of equity in our system of taxation as between one taxpayer and another in similar circumstances and in different parts of the country. We are now proposing to introduce an element of discrimination in a form which we have not had before. We on this side of the Committee do not dissent from that. We have supported it in the past. We were pressing it on the Government while they were still sticking to the traditional old principles of taxation. Therefore, we are wholly in accord with any discrimination in taxation to assist economic purposes. We do not object to discrimination but we have to consider the method and efficacy of doing it.
I am surprised that the chairman of the National Economic Development Council has said so little about the Report of his Council, and in the debate so far too little attention has been given to the background of the Amendment moved by the hon. Member for Huddersfield, West (Mr. Wade). What the Liberal Amendment does is to put forward the N.E.D.C. concept. The Chancellor says there is little difference between the growth point concept and the local employment area concept. I submit that there is a big difference between them and that the N.E.D.C. favours the growth point concept and not the local employment area concept.
It is worth while dwelling for a moment upon the differences. I am sorry that under the stress of time the hon. Member for Huddersfield, West did not read more of the N.E.D.C. Report, because he will find there the whole case for the Liberal Amendment and the criticisms of the course which the Chancellor has chosen to take. It should be said in this Committee that if this august body, the National Economic Development Council, is to justify its place in economic thinking and planning some attention must be paid to what it says. It is composed of distinguished members of the trade union movement, distinguished members of the employers' organisations, economists and Ministers and is presided over by the Chancellor of the Exchequer. There is not one word in paragraphs 94 to 97 of the latest Report of the Council which supports

the step that the Chancellor proposes in the Clause.

Mr. Maudling: On the other hand, it is fair to say that the Budget as a whole was greatly influenced and widely welcomed by the Council.

Mr. Houghton: This is one of the most important features of what the Budget proposes. In this important respect, the Report of the National Economic Development Council runs counter to what the Chancellor is proposing.
I hope that my hon. Friends who have spoken so movingly on behalf of Stoke-on-Trent and north Staffordshire will forgive me if I concentrate on what I think is the main issue. Many of us have constituency anxieties. I certainly have. It would be unfair of me to use the position which I occupy tonight to stress them particularly. What we are concerned about is the stimulation of industrial and economic growth generally. That is the point that was stressed in the Report of N.E.D.C.
In paragraph 94—I am sorry to have to quote it, but it helps me to make my point—it states:
Present policy, embodied in the Local Employment Act, is closely geared to the relief of high local unemployment in development districts designated by the Board of Trade, rather than to the promotion of growth more generally in regions.
Following the paragraph read by the hon. Member for Huddersfield, West, it develops the idea that to foster the growth point concept would probably be best in the long run.
My view is that the N.E.D.C. concept is the more intelligent way and could be the more effective way if it were employed with imagination, vigour and drive. The Government, however, shrink from the implications of the N.E.D.C. Report in the direction of planning and of a survey of the country's industrial potential. The Chancellor has taken what he may regard as the more practical line of using local employment areas for this purpose, thinking, perhaps, that that removes many of the problems of administration, without fully appreciating that this course may not promote the purpose which he has in mind. He has adopted a rule-of-thumb method for applying the concessions of the Clause.
Local employment areas do not by themselves offer the flexibility of industrial location which is needed in their own interests as well as in the interests of economic growth. That is the nub of the problem. The choice before the Committee in the Amendment moved by the hon. Member for Huddersfield, West and the Clause is this difference of application of the principle of discriminaton.
The Chancellor may argue, "Yes, but local employment areas are at hand. They are prescribed. They are there. The Inland Revenue can tell what and where they are. We do not have to wait for further surveys or further estimates of possible points of economic and industrial growth. We can get on." The point is, will the Chancellor get on in the best way? Will the giving of these concessions in these areas alone necessarily provide the economic growth which we have in mind? Already, as my hon. Friend the Member for Fife, West (Mr. W. Hamilton) has pointed out, the concessions given in the local employment areas have failed to achieve their purpose. How, then, will these additional fiscal concessions change so dramatically the disappointing experience that we have had of them already?
This Clause, in contrast to the Report of the National Economic Development Council, represents on the part of the Chancellor lack of courage and lack of bold intention to get the whole country moving to greater economic activity. Important as it is in certain areas, it is not necessarily—and I doubt whether it will be—the prescription for the national

good as a whole. Therefore, I ask my hon. Friends to support the Amendment when it is put to the vote.

11.0 p.m.

Mr. Ellis Smith: Relatively, we who speak for north Staffordshire are very satisfied with the contribution that we have been able to make and especially with the undertaking given by the Chancellor that he will watch the developments and consider what has been said.
But it would have been wrong of me to have allowed the debate to go by without putting another part of the criteria on record. The Chancellor has already dealt with 95 per cent. of the criteria, but he omitted a part which we have special reason for asking to be considered. The Local Employment Act provides that the employment should be appropriate to the needs of the locality and refers to places where there is a high proportion of disabled men.
That is the point that I want to make. In north Staffordshire we have relatively a higher proportion of disabled men than any other part of the country. We have miners. The statistics speak for themselves, and are on record in the Library. Besides the miners suffering from pneumoconiosis and other industrial diseases, there are the pottery workers. I hope that when the Act is being administered in future these facts will be considered.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 204, Noes 134.

Division No. 119.]
AYES
[11.2 p.m.


Agnew, Sir Peter
Campbell, Gordon (Moray &amp; Nairn)
Drayson, C. B.


Allason, James
Carr, Robert (Mitcham)
du Cann, Edward


Ashton, Sir Hubert
Cary, Sir Robert
Duncan, Sir James


Atkins, Humphrey
Channon, H. P. G.
Eden, Sir John


Awdry, Daniel (Chippenham)
Chataway, Christopher
Elliot, Capt. Walter (Carshalton)


Balniel, Lord
Chichester-Clark, R.
Elliott, R.W.(Nwc'tle-upon-Tyne, N.)


Barber, Anthony
Clark, Henry (Antrim, N.)
Emery, Peter


Barter, John
Clark, William (Nottingham, S.)
Emmet, Hon. Mrs. Evelyn


Batsford, Brian
Clarke, Brig. Terence(Portsmth, W.)
Errington, Sir Eric


Bennett, Dr. Reginald (Gos &amp; Fhm)
Cooke, Robert
Farr, John


Biggs-Davison, John
Cooper-Key, Sir Neill
Fletcher-Cooke, Charles


Bingham, R. M.
Cordeaux, Lt.-Col. J. K.
Fraser, Rt. Hn. Hugh(Stafford&amp;Stone)


Birch, Rt. Hon. Nigel
Garfield, F. V.
Fraser, Ian (Plymouth, Sutton)


Bishop, F. P.
Costain, A. P.
Freeth, Denzil


Black, Sir Cyril
Courtney, Cdr. Anthony
Galbraith, Hon. T. G. D.


Bourne-Arton, A.
Craddock, Sir Beresford (Spelthorne)
Gammans, Lady


Box, Donald
Crawley, Aidan
Gardner, Edward


Boyd-Carpenter, Rt. Hon. John
Crowder, F. P.
Gibson-Watt, David


Boyle, Rt. Hon. Sir Edward
Currie, G. B. H.
Gilmour, Sir John (East Fife)


Brewis, John
Dance, James
Glyn, Dr. Alan (Clapham)


Bromley-Davenport, Lt.-Col. SirWalter
d'Avigdor-Goldsmid, Sir Henry
Goodhew, Victor


Brown, Alan (Tottenham)
Deedes, Rt. Hon. W. F,
Gower, Raymond


Buck, Antony
Donaldson, Cmdr. C. E. M.
Gresham Cooke, R.


Bullard, Denys
Doughty, Charles
Grosvenor, Lt.-Col. R. G.




Gurden, Harold
McLaughlin, Mrs. Patricia
Sandys, Rt. Hon. Duncan


Hall, John (Wycombe)
Maclay, Rt. Hon. John
Scott-Hopkins, James


Hamilton, Michael (Wellingborough)
Maclean, SirFitzroy (Bute&amp; N. Ayrs)
Seymour, Leslie


Harris, Reader (Heston)
Macleod, Rt. Hn. lain (Enfield, W.)
Sharples, Richard


Harvey, Sir Arthur Vere(Macclesf'd)
McMaster, Stanley R.
Shaw, M.


Harvey, John (Walthamstow, E.)
Macpherson, Rt. Hn. Niall(Dumfries)
Shepherd, William


Harvie Anderson, Miss
Maginnis, John E.
Skeet, T. H. H.


Hay, John
Markham, Major Sir Frank
Smith, Dudley (Br'tnf'd &amp; Chiswick)


Heald, Rt. Hon. Sir Lionel
Matthews, Gordon (Meriden)
Smithers, Peter


Hiley, Joseph
Maudling, Rt. Hon. Reginald
Spearman, Sir Alexander


Hill, Dr. Rt. Hon. Charles (Luton)
Mawby, Ray
Speir, Rupert


Hill, Mrs. Eveilne (Wythenshawe)
Maxwell-Hyslop, R. J.
Steward, Harold (Stockport, S.)


Hill, J. E. B. (S. Norfolk)
Maydon, Lt.-Cmdr. S. L. C.
Stoddart-Scott, Col. Sir Malcolm


Hirst, Geoffrey
Mills, Stratton
Storey, Sir Samuel


Hobson, Sir John
Miscampbell, Norman
Studholme, Sir Henry


Hocking, Philip N.
Montgomery, Fergus
Summers, Sir Spencer


Holland, Philip
More, Jasper (Ludlow)
Tapsell, Peter


Hollingworth, John
Morgan, William
Temple, John M.


Hope, Rt. Hon. Lord John
Morrison, John
Thatcher, Mrs. Margaret


Hopkins, Alan
Nabarro, Sir Gerald
Thompson, Sir Richard (Croydon, S.)


Hornby, R. P.
Osborn, John (Hallam)
Thornton-Kemsley, Sir Colin


Hornsby-Smith, Rt. Hon. Dame P.
Page, Graham (Crosby)
Tiley, Arthur (Bradford, W.)


Howard, John (Southampton, Test)
Pannell, Norman (Kirkdale)
Touche, Rt. Hon. Sir Gordon


Hughes-Young, Michael
Partridge, E.
Turner, Colin


Hulbert, Sir Norman
Peel, John
van Straubenzee, W. R.


Hutchison, Michael Clark
Percival, Ian
Vaughan-Morgan, Rt. Hon. Sir John


Iremonger, T. L.
Peyton, John
Vickers, Miss Joan


Jennings, J. C.
Plekthorn, Sir Kenneth
Walder, David


Johnson, Dr. Donald (Carlisle)
Pilkington, Sir Richard
Walker, Peter


Johnson, Eric (Blackley)
Pott, Percivall
Walker-Smith, Rt. Hon. Sir Derek


Johnson Smith, Geoffrey
Powell, Rt. Hon. J. Enoch
Wall, Patrick


Jones, Arthur (Northants, S.)
Price, David (Eastleigh)
Ward, Dame Irene


Kerans, Cdr. J. S.
Prior, J. M. L.
Webster, David


Kerr, Sir Hamilton
Prior-Palmer, Brig. Sir Otho
Whitelaw, William


Kitson, Timothy
Profumo, Rt. Hon. John
Williams, Paul (Sunderland, S.)


Langford-Holt, Sir John
Pym, Francis
Wills, Sir Gerald (Bridgwater)


Leather, Sir Edwin
Rawlinson, Sir Peter
Wilson, Geoffrey (Truro)


Legge-Bourke, Sir Harry
Redmayne, Rt. Hon. Martin
Wise, A. R.


Lewis, Kenneth (Rutland)
Rees, Hugh
Wolrige-Gordon, Patrick


Litchfield, Capt. John
Rees-Davies, W. R.
Wood, Rt. Hon. Richard


Longden, Gilbert
Renton, Rt. Hon. David
Woollam, John


Loveys, Walter H.
Roberts, Sir Peter (Heeley)
Worsley, Marcus


Lucas-Tooth, Sir Hugh
Roots, William
TELLERS FOR THE AYES:


MacArthur, Ian
Ropner, Col. Sir Leonard
Mr. Finlay and


McLaren, Martin
Russell, Ronald
Mr. Frank Pearson




NOES


Ainsley, William
Foot, Michael (Ebbw Vale)
Mahon, Dr. J. Dickson


Albu, Austen
Forman, J. C.
McBride, N.


Allaun, Frank (Salford, E.)
Galpern, Sir Myer
MacColl, James


Allen, Scholefieid (Crewe)
George, LadyMeganLloyd(Crmrthn)
MacDermot, Niall


Awbery, Stan (Bristol, Central)
Ginsburg, David
MacPherson, Malcolm (Stirling)


Baxter, William (Stirlingahire, W.)
Grey, Charles
Manuel, Archie


Bennett, J. (Glasgow, Bridgeton)
Grimond, Rt. Hon. J.
Mellish, R. J.


Benson, Sir George
Hale, Leslie (Oldham, W.)
Mendelson, J. J.


Blackburn, F.
Hamilton, William (West Fife)
Millan, Bruce


Blyton, William
Hannan, William
Milne, Edward


Boardman, H.
Harper, Joseph
Mitchison, G. R.


Bowden, Rt. Hn. H.W. (Leics.,S.W.)
Hayman, F. H.
Morris, John


Bowen, Roderic (Cardigan)
Hill, J. (Midlothian)
Neal, Harold


Braddock, Mrs. E. M.
Holman, Percy
Noel-Baker, Francis (Swindon)


Bray, Dr. Jeremy
Hooson, H. E.
Noel-Baker, Rt. Hn. Philip(Derby, S.)


Broughton, Dr. A. D. D.
Houghton, Douglas
O'Malley, B. K.


Brown, Rt. Hon. George (Belper)





Howell, Charles A. (Perry Barr)
Oran', A. E.


Butler, Herbert (Hackney, C.)




Carmichael, Nell
Hoy, James H.
Oswald, Thomas


Castle, Mrs. Barbara
Hughes, Cledwyn (Anglesey)
Pannell, Charles (Leeds, W.)


Corbet, Mrs. Freda
Hughes, Emrys (S. Ayrshire)
Parker, John


Craddock, George (Bradford, S.)
Hunter, A. E.
Pearson, Arthur (Pontypridd)


Cronin, John
Hynd, John (Attercliffe)
Pentland, Norman


Crosland, Anthony
Irvine, A. J. (Edge Hill)
Popplewell, Ernest


Crossman, R. H. S.
Irving, Sydney (Dartford)
Price, J. T. (Westhoughton)


Cullen, Mrs. Alice
Janner, Sir Barnett
Probert, Arthur


Dalyell, Tam
Jeger, George
Redhead, E. C.


Davies, G. Elfed (Rhondda, E.)
Jenkins, Roy (Stechford)
Rhodes, H.


Davies, Harold (Leek)
Jones, Dan (Burnley)
Roberts, Albert (Normanton)


Davies, Ifor (Gower)
Jones, Elwyn (West Ham, S.)
Roberts, Goronwy (Caernarvon)


Diamond, John
Jones, J. Idwal (Wrexham)
Robertson, John (Paisley)


Edwards, Rt. Hon. Ness (Caerphilly)
Jones, T. W. (Merloneth)
Robinson, Kenneth (St. Pancras, N.)


Edwards, Robert (Bilston)
King, Dr. Horace
Silverman, Sydney (Nelson)


Finch, Harold
Lee, Miss Jennie (Cannock)
Rodgers, W. T. (Stockton)


Fitch, Alan
Lever, Harold (Cheetham)
Ross, William


Foot, Dingle (Ipswich)
Lewis, Arthur (West Ham, N.)
Short, Edward







Stater, Joseph (sedgefield)
Thompson Dr. Alan (Dunfermiline)
Williams, LI (Abertillery)


Small, William
Thornton Ernest
Williams, W. R. (Openshaw)


Smith, Ellis (Stoke, S.)
Tomney, Frank
Williams, W. T. (Warrington)


Soskice, Rt. Hon. Sir Frank
Wainwright, Edwin
Willis, E. G. (Edinburgh, E.)


Spriggs, Leslie
Warbey, William
Wilson, Rt. Hon. Harold (Huyton)


Stones, William
Watkins, Tudor
Winterbottom, R, E


Storess, Dr, Barnett(Stoke-on-Trent, C.)
Wells William (Walsall, N.)
Wyatt, Woddrow


Swingler, Stephen
Wigg, George
Yates, Victor (Ladywood)


Taylor, Bernard (Mansfield)
Wilkins, W. A.)
TELLERS FOR THE NOES:


Thomas, Iorwerth (Rhondda, W.)
Willey, Frederick
Mr. Wade and Mr. Lubbock

Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Harold Lever: It is extraordinary that a matter of fundamental principle of our taxation law should be breached and that the Government should not propose at any stage, so far as we know, to make out a cogent argument for breaching the principle enunciated by my hon. Friend the Member for Sowerby (Mr. Houghton) against discrimination between one taxpayer and another.
The Chancellor of the Exchequer has vouchsafed to us a few clouded generalisations on the subject and has told us that we ought to support the Clause which is generally discriminatory in favour of several districts and consequently discriminatory against others which have to foot the bill for the concessions which are to be made. He relies on the generalised sentiment of good will which we all have for the development districts and on the clouded concept of the richer areas helping the poorer. Without real argument, he is urging us to breach a fundamental principle in our tax law and to give massive concessions to persons carrying on profitable businesses in development districts on the ground that this is the rich of the country helping the poor.
This attractive but utterly irrelevant metaphor ought to be examined. We ought to be quite clear that in so far as Government policy simply discriminates financially in favour of one area at the cost of another, that is not the rich persons of the country helping the unemployed of the development districts, but, if the scheme works, it has the consequence that the employed man in one area will lose his job in order to provide a job for someone else in a development district, a person for whom we sympathise, but to whose problems the solution will not be provided by putting out of work someone else in some other part of the country.
11.15 p.m.
If we put somebody out of work in some other part of the country by discriminatory legislation of this kind to provide employment in the development districts, it will not be the rich helping the poor, but on the contrary the poor of one part of the country suffering to mitigate the lot of the poor in another part of the country.
The mere act of fiscal discrimination, apart from being an improper act unless justified by a cogent, comprehensive, argument to which we have not been treated, is simply to shunt unemployment from one part of the country to another, and it cannot be any solution to the problem of the development districts to inflict, without logic or argument, on other parts of the country, discriminatory taxation provisions of this kind.
The next point which has never been made by the Government is that even if we were to accept that there was some advantage in moving unemployment of this kind as a consequence of discriminatory fiscal provisions, the Chancellor has to make it clear that this is occurring as a result of the substantial fiscal concessions that we are invited to make by this Clause. Nobody has given any logical argument which leads me to believe that every time we give away £1 million of the revenue of the country in this discriminatory tax holiday to those who have profitable business in development districts this will in any way relieve the depressed areas in the development districts.
Even in an area where 19 businesses out of 20 are run profitably, and the twentieth is not run at all because it is unprofitable and providing 5 per cent. of the incidence of unemployment, the effect of relieving the Income Tax on profits in this discriminatory way is simply to relieve the taxation of the profitable segments of the industry in those areas. It does not do anything


for the people who are not working because their industries will not work at a profit in those areas, so for every £1 million of the taxpayer's money that we are invited to give away in this clouded, sentimental, and illogical way, the greater part will go straight to the pockets of people conducting profitable businesses in the development districts who do not need any additional incentive to remain there, and it will not do anything to bring people into those areas.
A little consideration should have told the Chancellor that if we say that in a given geographical area we shall relieve Income Tax, because that is what we are doing—the Minister boasted that he was practically providing a tax holiday in these areas—it stands to common sense that the main beneficiaries will not be the people out of work, or the industries at a standstill, but the industries that are working profitably, and quite irrelevantly they will be given a subsidy.
The trouble with development districts or places with a high incidence of unemployment is that it is hard to run an industry profitably there, and the offer to pay 65 per cent, of a man's losses is not a source of excitement to industrialists. It is not likely to cause great excitement in the bosoms of industrialists who see no inducement to go to these unprofitable areas, but the Government are prepared to pay 65 per cent. of their Income Tax, and they will have to pay only one-third of their losses if they go to these hopeless areas where they cannot make profits.
If one is in favour, which I am not, of discrimination to bring people into the development districts by fiscal concessions, the kind of concession that will bring them there is not a relief on profits. The real problem is to make profitable what is unprofitable by relieving the percentage of tax. If we do not make profitable what is unprofitable we shall not induce anybody to go to these areas.
The most that can be said about this concession is that it will impinge on the fractionally and marginally profitable firms, who will say, If we went into the area on the normal terms we would show only 3 per cent, on our capital, but if we go in with these concessions

we will show 3 per cent. tax-free." It is theoretically conceivable, if one is conducting a seminar in economics, to say that there are a few firms that would move, but as is the case with most Government concessions, we shall not improve the basic situation in these areas. We cannot do that until we make them into areas where profitable activities can be carried on. We shall not do any good simply by making this unprincipled concession, which will result in the relief of taxation only in respect of already profitable industries in these areas.
The Chancellor said there was a social case to be made out for spreading unemployment more thinly over the country. If there is an area where the unemployment level is 5 per cent., he says that that unemployment should be relieved by this form of discrimination, even though it means creating some unployment in the more profitable areas. Hon. Members must decide whether that social case has been made out.
But the Chancellor went on to say, more remarkably, that the economic case was very powerful, and was really at the back of this—as he described it—most important Clause in the Bill. He said that there was a great demand for labour in some areas, and that by these discriminatory measures we would be able to relieve that pressure and increase the demand in the under-employed areas, thereby producing a nice equation. We shall do nothing of the kind. If we create 10,000 jobs in development districts by using this form of discrimination we will not ease the demand for labour in Birmingham or London; we shall merely move unemployment into the marginal areas which are already struggling with the more prosperous areas.
My hon. Friend the Member for Westhoughton (Mr. J. T. Price) asked the Chancellor what this concession did for his area. I can tell my hon. Friend that he is being less than just in saying that the Chancellor is doing nothing for him; the Chancellor is going to increase unemployment in Westhoughton.
The economic case was incompletely made out by the right hon. Gentleman, and this was appalling to me, because it appeared to have no logic or common sense. If this measure results in a few thousand jobs being drawn from one part of the country to another those jobs


will not be drawn from areas which are attractive and profitable to employers, but from areas which are already precariously battling to maintain themselves, and are able to do so at present only a little better than the areas of very high unemployment. The Chancellor will tip the balance against those precariously balanced areas in favour of the hard-hit areas, and shift the unemployment a little from the development districts into the marginally economically attractive areas.
The economic case is pure bunkum, and intellectually beneath contempt. The Chancellor did not put the case forward with seriousness. The only admiration I have for him in relation to this Clause is that he managed to keep a straight face while he urged the Committee to accept it. It is an extraordinary departure from normal fiscal policy, and no serious attempt has been made to show that it has any logic behind it, or that it will confer any benefit.
The boundaries provisions are ludicrous, and the Chancellor recognises this. He says, "I agree that it is difficult to justify supporting one area more than another." He is saying to his hon. Friends, "This whole Clause is illogical beyond words, and so do not press me to make it logical by including in it areas which are clearly entitled to benefit as much as those which are already in".
My hon. Friend has made the case against the Clause and I will not repeat it except to say that the Clause has a standard which has no common sense and makes no economic sense and is not moral. It does not take the percentage of unemployment in a town but in a geographical area. The Committee should understand that if we discriminate in favour of one taxpayer we shall discriminate to the same extent against another. If we discriminate in favour of a county suffering a high percentage of unemployment and not in favour of a town, we shall be discriminating against the town. If it is true that the fiscal advantages are in favour of increasing employment in larger geographical areas, correspondingly they attack the position of those who do not benefit, like the areas mentioned by my hon. Friend.
All this makes me conclude that this Clause ought to be opposed. Those who

save tax as the result of these provisions will be those who are already making profits. If I am wrong in saying that this is no inducement for the reasons I have given—because we should make industry profitable in areas and not just relieve tax on profits which people cannot make—mathematically the tax concessions must go to nineteen-twentieths of industry in an area which is already profitable.
In drawing off the unemployment to support the moral or the economic case of the Chancellor, it will not be drawing unemployment from the highly profitable areas like London and Birmingham, but from the marginal and precarious areas. No social economic or moral advantage will be secured by reason of the tax discriminations we are urged to make. The whole thing is based on nonsense and riddled with illogicality. This has appeared in more than one Amendment. The Economic Secretary had to defend the relief of taxation for undeserving persons on immobile plant and equipment, but not on the mobile plant and equipment of deserving persons. This is characteristic of the unprincipled, illogical character of the tax concessions in this Clause. I urge the Committee to reject it. I wish to voice my protest against it. The wrong people will benefit and the purpose which is intended will not be achieved.
If the Clause is to be effective it must be part of a plan to improve the general prosperity and economic development of the country as a whole. We cannot do that piecemeal and we cannot hope to get any result from this except the kind of self-congratulation to which we have been treated by the Chancellor in his brief encomiums of himself and his Clause. Unfortunately they are unwarranted in logic or results from the Clause. I urge the Committee not to allow it to stand part of the Bill, but to reject it.

11.30 p.m.

Mr. Milan: I agree with my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) that this is a very important Clause. I cannot say that I agree with very much else that he said, but I shall return to that. Perhaps I might make a detailed point before doing so.
Will the Financial Secretary look at subsection (7,c)? He will know that a great deal of interest has been expressed recently, partly as a result of the initiative taken by the Minister of Public Building and Works, in the possibility of using spare shipyard capacity for the industrial building of houses. So far as I see from reading subsection (7,c), any capital expenditure on equipping a shipyard to do this kind of work would be excluded. I should have thought there was a very strong case for saying that it should be included in this Clause. No Amendment about it has been put down, but perhaps the Financial Secretary could look at the point and, if necessary, it could be put right on Report if he agrees that there is an anomaly here.
Returning to the main subject of the Clause, although I have a number of critical things to say about it, I welcome it very much. I say that the more especially as my constituency happens to be in a development district and naturally one is very glad to see the Government taking any action to provide additional incentives to attract industry to those areas. There is a sense in which one can say that the necessity the Government have felt to introduce this Clause, along with other improvements they are making in standard grants for building, machinery and a number of other things, simply gives point to the complaint we have been making about the Government's general economic policy—that it is because their policy has so disastrously failed that the situation in these development districts is so extremely serious.
The basic need for the development districts is an expanding economy for the country as a whole. I do not think that if we failed to get an expanding economy for the country as a whole we could possibly solve the problems of the development districts even by adding considerably to the financial incentives to industrialists to move to those areas. Without general economic expansion, those areas will suffer very considerably and no amount of adding to special provisions for those areas can solve the problem.
On the other hand—there is where I disagree fundamentally with my hon. Friend the Member for Cheetham—I do not think it follows conversely that if we

got general economic expansion in the country as a whole we should by that and that alone solve the problems of the development districts. If we could manage to do that without any special Government intervention we should be doing something quite contrary to the experience of every other highly industrialised country. The problems we have in certain areas are repeated in the countris of the Common Market. The south of Italy is an obvious example, but the same happens in France, in Scandinavia and in the United States. It does not follow that if we get general economic prosperity every part of the country will share in it.

Mr. Mendelson: My hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) never made that point.

Mr. Millan: I know that my hon. Friend did not in those terms, but, if my hon. Friend the Member for Penistone (Mr. Mendelson) will contain himself in patience I shall come to the point where I think that this is absolutely relevant to what my hon. Friend the Member for Cheetham said. If the argument I have been putting is correct, it follows that some sort of discriminatory attention has to be given to certain areas of the country. My hon. Friend was making a purist case in principle against discrimination whether by taxation measures or any other kind of measure.

Mr. H. Lever: I hope that I did not make my case so badly. Not only did I not say that, but my previous speeches in the House have been very much in the contrary sense. I remember being almost alone on these benches and vigorously supporting the Government when they brought in a scheme to give financial help to Colvilles to build a sheet steel mill in Scotland. The Government were discriminating in favour of Colvilles, but I supported them. I am in favour of help being given to these areas provided that it fits into sensible and logical plans which will produce the results intended by the House.

Mr. Millan: I cannot answer the speeches which my hon. Friend made about Colvilles. I was dealing with the speech which he made this evening. He said that he was not in favour of discriminatory taxation treatment, and the point which I make is that if we are to


solve the problem of these development districts, discriminatory treatment is required. It seems to me that it is being unduly purist to rule out in that context discriminatory taxation treatment. There is a strong case for discriminatory taxation treatment, and I am glad that the Government have accepted it, because it has been pressed on them from this side of the Committee in previous Finance Bill debates.
It would be possible to discriminate in favour of the development districts in a negative way by imposing taxation penalties against firms in overcrowded areas, where there is great pressure on resources and labour, and when I see the large sums of money which are being paid under the Local Employment Act and now by taxation incentives, I feel that we should look carefully at the possibility of giving incentives by providing a negative incentive in areas where there is a great pressure on resources. Obviously one could do that only if the economy were expanding as a whole, otherwise there would be from the Midlands and the South-East the kind of complaints which we have heard from some of my hon. Friends today that certain areas which at present do not get assistance nevertheless have considerable difficulties.
Nevertheless, the whole tendency of the Government's policy continually to add financial incentives and to provide for a greater and greater expenditure of Government money to encourage industry to go into development districts requires very serious consideration, such as we cannot give adquately on this Clause.
Because, as I stated earlier, I have a constituency interest, I very much hope that the Clause will be successful, but I have some doubt about the effectiveness of the methods proposed in the Clause. Without using the term, it provides a tax holiday in development districts, and this tax holiday is given even if the firms are not providing any additional employment. That introduces a considerable change in principle. It is a tax holiday in the form of an interest-free loan. It is only a question of changing the incidence of the depreciation allowances, for the total depreciation allowances are not altered and therefore in a sense the advantage to be gained under the Clause is temporary.

The advantage lies in the interest which is saved in the first year during which the Clause operates. If the Clause continued to operate, the temporary advantage would be converted into a permanent advantage because one continually adds to one's capital expenditure, thus getting the advantage. Although one is losing the advantage on the previous capital expenditure, the new capital expenditure gives a greater advantage, and the gain has a certain permanency.
Two conditions must be fulfilled for that to continue to apply. First, it is obvious that the capital replacement must continue and, secondly, the district concerned must remain a scheduled one under the Local Employment Act. There is a serious disadvantage in this free depreciation provision, for when an area is descheduled there will be a loss to the firm. It is not just a question of cutting off an advantage which a firm has been getting, but of the firm having to some extent to pay back the advantage it had previously got.
This introduces an element of uncertainty into this method of financial incentives. It is an undesirable element which must make businessmen hesitate before taking full advantage of the Clause. Had the Chancellor decided to give the additional incentives in development districts simply by increasing the investment allowances, this disadvantage of uncertainty would not have arisen. An investment allowance can be given for a particular item of expenditure in a particular area at a particular time. Once an investment allowance has been given it cannot be retrieved by the Inland Revenue. It is given permanently.
Had the Government adopted that method of approach—and I should have preferred it—there would have been less advantage to industry in the development districts in the earlier years, but in the long term the advantages could have been exactly the same, depending on the discriminatory investment allowances applied, and this element of uncertainty which will, I believe, prejudice the operation of the Clause, would have been removed.
At the time of the Budget the Government produced examples to show what industrialists could obtain under the free depreciation provisions. I will not go into


the details of these examples, except to give one instance and to point out that they were drawn in the most favourable, in some cases absurdly favourable, terms; the kind of terms which in practice are not likely to apply in many cases. To illustrate what I mean, in one example the capital expenditure in the development district was to be £1 million, including working capital. To get the advantages of the scheme it would be necessary for a firm to make at least £571,000 in profits in the first year. Obviously no firm will make profits of that kind in a development district from the investment of £1 million unless it is already an established firm which is already making substantial profits. Alternatively, this can happen only to a firm which is making big profits from outside the development district but is using the district to get a tax holiday on its profits earned outside the area.
In view of these uncertainties, it must be extremely difficult for the Government to calculate what this provision is likely to cost. However, the Financial Statement said that in a full year it will cost £45 million. I should like to know how the Government arrived at that calculation. In any case, I believe that the Government have been too optimistic about the operation of the Clause. I accept the principle of discrimination and I am glad that the Government have accepted this principle for the development districts.
11.45 p.m.
I am not so happy about the method which the Chancellor has adopted. Perhaps the biggest advantage in this method, as compared with an increase in investment allowances, is the psychological advantage. This method is completely new. The Chancellor may have reasoned that if he increased investment allowances for development districts industrialists would not pay much attention because the allowances are familiar and they would see nothing new or exciting in the proposal. That argument may be perfectly valid, but on the whole I would give industrialists more credit for working out what the proposal in the Clause will mean in practice. If they do that they will find that, although it is superficially and indeed actually attractive in many circumstances, it may not be as attractive

to as many industrialists as the Chancellor hopes.
I wish the Clause well and I hope that, despite my criticisms it will work, if only because my constituency is in a development district. I am glad to see some new ideas coming into the Finance Bill. I am particularly glad that the principle of discrimination has been accepted but I still feel that this kind of approach requires a long hard look directed at it.

Dr. J. Dickson Mahon: agree with very much of what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) has said. The Government reply should prove extremely interesting because the arguments advanced, and particularly my two hon. Friends' criticisms of the Clause, are not our arguments. They are arguments which the Government used in rejecting a somewhat similar Clause which we on this side of the Committee moved last year. It is entertaining to go over the record of the debate on 5th June, 1962, and to notice how the Government have stood on their heads and will now have to advance our arguments then whilst we in turn have today advanced at least two of their arguments on that occasion.
The then Financial Secretary to the Treasury said in that debate:
One point which strikes me straight away is that investment allowances confer their full benefit only where there are profits sufficient for them to be set against, and that is often not the case with new or small firms. I think that it is generally recognised in the Committee that, where there is depopulation, it is a multiplicity of small projects rather than one very large project which are the most important. Do not let us forget that the cash benefit from the investment allowances follows the investment, so that it cannot usually help to finance it. The difficulty in a development area, to use a familiar phrase these days, is the difficulty of securing take-off. I am very doubtful whether the use of the investment allowance could ever be a good way of securing take-off in a development area".—[OFFICIAL REPORT, 5th June, 1962; Vol. 661, c. 288–9.]
I shall be interested to hear whether the Government have changed their mind on this strong argument. We were impressed by it last year.
This was the first of four arguments. Another was what happened when an area was delisted, and the then Financial Secretary advanced that argument on


that occasion. My hon. Friend the Member for Craigton has questioned the meaning of subsection (6). I take it that the contracts entered into would be continued and that there would not be the same upset as one would expect from my hon. Friend's criticism, but I am disturbed about this.

Mr. Millan: The point is that the method of free depreciation gives an initial advantage which is gradually paid off to a certain extent, but once de-scheduling takes place there is no further advantage to come, because the payment back continues for a number of years, and that is a great disadvantage.

Dr. Mabon: That is why I am concerned, and the Government's record in speedy d elisting is alarming. When the Ford arrangement was made, Merseyside was listed and then delisted. I think that I am right in saying that. Certainly this is what happened at Bathgate. It was scheduled as a development district, the B.M.C. came, it was descheduled and ultimately it was rescheduled. The curious thing in that case is that the unemployment percentage has gone up since the arrival of the Bathgate factory. I do not for one ludicrous moment suggest that that is cause and effect, but it is sadly interesting that it has happened.
While the alacrity with which the Board of Trade has been able to make these decisions may be commendable in some ways, in the context of the Clause it would be most unfortunate. In arguing the case for the Clause, the Treasury Ministers must say, "Yes, we know. We have thought about this and will advise the Board of Trade not to deschedule areas quite so quickly."

Mr. Dalyell: Would my hon. Friend accept that had there been constancy in the beginning of the B.M.C. project, the ancillary motor industries might have come, whereas they have not?

Dr. Mahon: I accept that readily. The point made by my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) is, in a way, a kind of second cousin of this one. In addition to the criticism against the Government of de-scheduling too quickly, there is the point of the failure to recognise in their own Act the meaning of the word "imminent". I wonder whether any Treasury or Board of Trade Minister can tell us

when they have scheduled an area which was going to suffer high unemployment imminently but not actually. I cannot think of one. We know that there have been areas in which there has been chronic, high, persistent unemployment, but I cannot think of an area which has not had chronic, high or persistent unemployment but which has had merely imminent unemployment. That is the word used in the Act. We were told that this was to be government by anticipation. It has never operated.
There is a great deal of substance in the argument of my hon. Friend the Member for Cheetham and the basic grievance about the restricted operation of these concessions omitting areas such as he represents. It followed from my hon. Friend's closing remarks that if the operation of the Local Employment Act were much wider and more sensible, the Clause in a certain form might have validity.

Mr. H. Lever: indicated dissent.

Dr. Mahon: I ask my hon. Friend to read his closing remarks. Perhaps he was carried away, but he will see that my comment is not unreasonable.

Mr. Lever: I hope I made it clear that I should welcome some such intervention on behalf of difficult areas if it was part of an overall economic plan for the expansion of the economic welfare of the country as a whole.

Dr. Mabon: I accept that. My hon. Friend certainly said it in his speech. I am talking about what would happen if the Local Employment Act were operated properly with the word "imminent" properly applied. Areas such as my hon. Friend's and those, such as Stoke-on-Trent and North Staffordshire, which were dealt with in the speeches on the earlier Amendment are good examples of what I am saying.
We have made the point from time to time that having a pinpointed pattern of development districts as distinct from an area of regional development is another great criticism of the Local Employment Act. It makes a false distinction between one area and another where people reside in one area and work in another and yet the employment statistics are such that one area is scheduled but not the other and no contribution is made to the welfare of both areas.
These were three of the arguments advanced against us by the Government last year. They said that it was difficult for the Inland Revenue to ascertain the definite areas to which this arrangement would apply. That was an administrative argument. Now the Government are identifying the areas for us and saying that they are development districts, just as we argued last year. Part of my hon. Friend's criticism against that is that this is too narrow a definition.
The Government's second argument was on the question of delisting, on which I have made my comments. They are particularly valid. I hope that the Financial Secretary will tell us what the Governnment policy will be in relation to this.
The third argument was based on the quotation which I have made from the Financial Secretary's speech last year. It is a particularly cogent one which I hope the Government have thought about, and I hope they will admit that they have changed their mind.
The fourth was based on the question of how discriminatory investment allowances might be adverse in areas of high unemployment where such allowances were for labour-saving investment. I did not know whether this was only a simple debating point that the Financial Secretary was making last year. He said that he did not wish it to be misunderstood as that. But if there is some substance in it, the Government have, clearly, thought about it and have an answer to give.
Like my hon. Friend the Member for Craigton, I am very much in favour of the Clause, as I was last year. The Labour Party takes a great deal of credit for having put the idea into the Government's mind, and it would be ungrateful of us not to acknowledge that the Government have changed their mind and are willing to incorporate this in the Finance Bill.
I am sorry that the hon. Member for Esher (Sir W. Robson Brown) is not here. During the Budget debate when the Chancellor mentioned that he was going to introduce this Clause into the Finance Bill, the hon. Member cried out "Brilliant" and said later that it was also thoroughly original. I challenged

him on that. It is a good idea, but I would not call it brilliant because I believe that it is fraught with difficulties and perhaps even dangers in some ways. But, basically, I accept that it is a good idea. However, it is going a little far to say that it is original, and I hope that, with modesty, the Financial Secretary will admit that some of our arguments last year have helped him along the way. Certainly his Clause is much bolder than the one we put forward last year and look forward to hearing his justification of it.

Mr. Mendelson: The Clause contains a number of policies which might marginally benefit some of the areas which are particularly depressed. As the Chancellor knows, it is, therefore, the common desire of all hon. Members that those benefits should accrue. He knows well that there will be general agreement when he introduces a Clause of this kind, with its tone and with its general purpose. But that does not absolve him or hon. Members from submitting to some economic analysis whether by such a programme and Clause he is advancing the major purposes of our economic policy in any significant manner.
We have faced this difficulty time and again under this Government. A policy is pursued for a number of years which inevitably leads to the growth of short-time working and unemployment in many parts of the country and at the same time aggravates the unemployment problems of certain industrial areas where there are other more permanent reasons already leading towards higher unemployment. This is particularly so in areas where some of the older industries are centred and where one can see that a certain amount of decline will take place.
When the Chancellor was at the Board of Trade and introduced the Local Employment Act he completely ignored all the pleas made and all the Amendments put forward by the Opposition on the points the House was then considering, asking him to do something towards the greater diversification of industry in some of the older industrial areas. He said then in justification of his attitude that at any given moment there is only a very limited amount of capital and public money available and, therefore, if one were to use that money at all, one must


concentrate it in a very limited number of areas already suffering very badly.
12 m.
It was suggested from these benches that the right hon. Gentleman should look not only to tomorrow but to the day after tomorrow. He accepted the slogan but did not act on it. Now he pursues the same very limited and shortsighted course. We will not oppose this provision because no one wants to destroy the hope of even some marginal and limited improvement which might come from it to hard-hit areas.

Mr. H. Lever: Should not the Committee have regard to the relationship between the benefit and the fiscal cost? If £45 million in one year produces about £1 million of benefit, we should surely think carefully before granting it.

Mr. Mendelson: I agree, and that in itself is justification for the debate, and my hon..Friend did a service in initiating it. At the same time, however, while we must consider the cost to the taxpayers in other areas, most of my right hon. and hon. Friends will agree that we could not find it in our hearts to destroy the hopes of areas already depressed and hard hit that some marginal benefit might come to them from this Clause.
By intellectual sleight-of-hand, the right hon. Gentleman tells us again and again that we must be reasonable and understand that if there is only a limited amount to be spent it must be concentrated on these areas. The gravamen of our charge is that he uses that policy as a substitute for what a responsible Government should be doing—initiating long-term planning to assist in the diversification of industry in a large number of our older industrial areas alongside aid for hard hit areas.
The Government have no real contact with firms helped under various schemes in the past. There is the serious case of Fords at Doncaster. No answer has come from the Government about that problem. The Financial Secretary has a special position in relation to this but I do not want to provoke him unduly because I know he cannot speak tonight particularly for his constituents. Nevertheless, we have never had a reasonable answer about the situation in Doncaster.
The Ford Company was helped to go to Merseyside and soon afterwards announced that it would close the factory at Doncaster, dismissing 2,000 people and thereby, in effect, moving unemployment from one part of the country to another. The Minister of Labour, when questioned in the House, said no final decision had been reached, but on that very day the notices of dismissal for 800 persons were being typed in the offices at Doncaster. The Minister was trying to mollify the House and lull the people of Doncaster into a false sense of security.
It was proved when the Minister of Labour was questioned the following week that he had not had this information. He said in reply to supplementary questions from this side of the House that hon. Members had now given him this information and he would now put his industrial relations officers on to it. The significance of this is that the Government had no contact with, let alone control of, this firm's actions, and the firm did not even feel it incumbent upon it to inform the Government about what it intended to do at its Doncaster plant.
It follows from that that this policy does not look far enough ahead. It concentrates on the so-called crash programme, but gives no guarantee, in spite of the considerable expenditure involved, that it will make any permanent contribution to the future economic reorganisation of the older industrial areas. I know that in what is probably an election year the Chancellor knows that he can secure a Clause which gives some economic aid, however marginal, to the most depressed areas and thereby absolve himself from the necessity of presenting a coherent economic argument in its justification, but it is obvious that this is a continuing argument.
There are a number of areas which have industries which are bound to decline not mainly because there will be less need for their products, but because there might be some technical reorganisation and modification and because they have had vast programmes of expansion in recent years and will produce at a very high technical level and therefore need less labour.
I fully support these expansion schemes. I fully supported the expansionist policy of the steel industry in modernising and developing its plant and I shall continue to do so. It is a policy which hon. Members on both sides of the Committee have urged on the industry which we have criticised for being backward and which has sometimes led us into the sort of situation which we had in the middle 1950s when we had to import steel from the United States of America and pay for it in dollar currency, which was an idiotic situation for one of the major steel producing countries.
I therefore support modernisation and expansion, but it must be accepted that if plant is modernised, less labour is needed in future. There is nothing wrong with that, provided that the Government see the situation developing and make sense of their economic policy and encourage new industries to move into the area affected, so that when people cannot find jobs in the industries in which they have been working for some years, there are other industries to absorb them.
The whole policy of introducing retraining centres will not make sense unless hand in hand with that policy is the provision and the encouragement of the provision of new industries in the areas where the training centres are to be located. It does not make sense to have a training centre to which the unions are asked to encourage people to go to be retrained unless they can look forward to a new job in a new factory in a new industry after they have been trained in a new skill.
We cannot develop this argument in too much detail on this Clause, but the Government would be mistaken if they thought that there were not many people in industry, both on the management and the trade union side, who fully realised that this is a very limited attempt at a very late hour to bring some relief at great cost to some of the areas very hard hit. Many people realise that this programme adds nothing to the general policy that is needed for greater diversification of industry in the older industrial areas.
It will not help the Government if they put forward the general plea that there is limited aid which can be given and that it must be concentrated on a

few small areas. All the criticisms of my hon. and right hon. Friends, who basically agree with the purposes of the Clause, are those which are being discussed up and down the country. As the Financial Secretary must know, there are many industrialists who have very grave doubts about whether this policy will make any long-term contribution to the solution of our problems.
We ought to have from the Government a much better and more coherent analysis of the situation instead of a propagandist reply. No one would wish to oppose some of the provisions of the Clause, but we have grave doubts about some of its objects being achieved. We hope that some good will come out of it, but we reject it as a substitute for a policy of greater industrial diversification which, in the long term, is the only policy which will make sense in the sort of situation with which we are faced now.

Mr. William Baxter: I have listened with great interest to the speeches on this Clause and to many speeches on other Clauses.
I wonder why the Government have introduced a Clause which they have rejected on previous occasions. On numerous occasions the Government have maintained that to introduce different fiscal policies for different parts of the country was bad in practice. From time to time many of us have said that the only way to cure the continuing problem of unemployment in Scotland is to have a different fiscal policy for Scotland. This may seem rather far-fetched, but it is now becoming an accepted part of the Government's policy that certain parts of the country should be treated differently from others.
I do not think, however, that this policy will cure the trouble, because cheek by jowl with areas designated under the Local Employment Act there are areas which are not to receive the benefits of the fiscal measures proposed for the development districts, and even in the development districts themselves the uncertainty about whether they will continue to be designated as development districts is causing many industrialists to decide against going to those areas. As my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) said, the benefits that can accrue in the first


instance while an area is scheduled under the Local Employment Act can be removed when the area is no longer so scheduled.
I am not saying that I am not glad that these steps are being taken, because half a loaf is better than nothing, but these provisions are bound to give rise to difficulties. Suppose an industry has many factories, and may interests, and let us assume that one of its factories is in a development district. How will the Government's financial advisers decide the margin of profit to be allowed for tax purposes under this Clause?
An undertaking may decide to move part of its business into an area designated under the Local Employment Act. It may also decide to move its head office to that area. How do the Government propose to define what part of the profit is made in the development district, and what part is made outwith it? This is a complicated problem, and I think that it will give rise to certain difficulties in the future.
The latter part of the Clause defines "mobile equipment" for the purposes of the Clause. There is a reference to
machinery or plant suitable for use only in or about a building or structure….
This can give rise to difficulties of definition. There are many types of equipment that an industrial establishment can bring into its factory, and which it can use in other areas or sites. If a builder wants to move his place of business into a development district he can easily do so, finding subsequently that his profits are being made not in the development district but outside it.
12.15 a.m.
In my considered opinion this provision will not fundamentally change the unfortunate state of affairs that exists in Scotland, and which has existed since before I was born. I am not saying that this problem has been created by this Government, but it is the responsibility of whatever Government are in power to try to devise ways and means of improving the situation. The Clause will not help in any great degree to remedy the present unfortunate position that Scotland finds herself in, because between 25,000 and 30,000 people are still leaving

Scotland every year—and not only from the development districts; they are leaving Scotland as a whole.
Many people take the view that the only way to cure our problem is to alter the fiscal system in such a way that greater emphasis will be placed on industrial activities and advancement, where the roots of industry would be bred in the soil and become part of the fiscal policy of the nation. We shall never provide the prosperity that is necessary for our country's future advancement if we act only in a piecemeal manner, such as is proposed in this Clause. We must reconsider our attitude to industrial development, and place it on a national basis.
There is a great deal of truth in what my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) has said, namely, that the greatest benefit from the Clause will accrue to businesses which are well-established in the local areas designated under the Act, and which are now making fairly substantial profits. They will undoubtedly get considerable advantages while they are covered by the provisions of the Local Employment Act.
The Government are making a stick to break their own back. I agree with the provision to some extent, but its repercussions are not fully realised by the Government. I can only think that the reason for the introduction of this provision and many other provisions in this Bill is that the Government are trying to pull the teeth of the Opposition. If they had not introduced such a provision as this they would have been attacked right, left and centre for their inactivity, and this would have had a bad effect on their election prospects in the near future. Like other parts of the Bill, this is a political manoeuvre. It is not based on common sense or logic. It is fundamentally wrong that a fiscal policy should be altered for small areas such as are designated in the Clause and in the Local Employment Act.
If the Government really want to do something they might consider altering the fiscal policy so as to give impetus to natural growth within our economy.

Dr. Bray: I wish to follow up what was said by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan). The point about reducing unemployment is an


economic or basic point. In my constituency, which is scheduled as a development district, the first reaction to the Chancellor's Budget speech was the closing of a steel works which had employed 1,600 men. Already 10,000 men in the area were unemployed. We hope that new industry will be attracted by the change in the allowances. But the matter should be considered in detail district by district throughout the country.
The change in the allowances will make development districts dependent on the construction phase of new industry. A low level of unemployment will be shown because of the investment going on. But when that phase is concluded and the investment dependent on it has stopped, the areas will sink back to the former level of unemployment.
1 should like to think that someone at the Board of Trade or the Ministry of Labour had taken notice of the local figures, but the questions which would elicit the information have not been asked. The local statistics of the Treasury are totally inadequate. An indication of the sincerity behind the policy of the Government would be a blitz on the local economic statistics upon which the whole machinery of the Clause and the Finance Bill depends for its administration.

Mr. Barber: The hon. Member for Glasgow, Craigton (Mr. Millan) asked a number of questions which I shall try to answer briefly, but I hope in a manner which will be satisfactory to the hon. Member. He asked whether shipyards engaged in the building of prefabricated parts for houses would come within the ambit of the Bill. It is our intention that they should, but I take the point that he made about subsection (7, c) when he quoted the phrase:
… not being a process in the construction or erection or a building or structure …
I think that the wording will enable shipyards building prefabricated houses to be covered by the Clause.
The hon. Member went on to deal with the position which arises when a development district is descheduled. This point was referred to by the hon. Member for Greenock (Dr. Dickson Mahon). The hon. Member for Craig-ton said that he thought that, because

of the possibility of descheduling, industrialists would hesitate to take advantage of the provisions to the extent that was hoped. I am not sure that I understood exactly the point the hon. Member was making. I take it that he appreciates that there are provisions to meet the possibility that a district may wish to cease to be a development district provided that, when it so wishes, the benefit of free depreciation will continue to run in respect of plant and machinery installed while it was a development district, and there are also other provisions. I should have thought that, if anything, the fact that these provisions are there to take care of that particular situation would encourage an industrialist, if he were contemplating going to a development district, to go there while it was a development district. He would buy plant and place orders for plant and so on because after the district had been descheduled, unless he had contracted to buy his plant before that change he would not get the advantage.

Mr. Millan: If an industrialist installs plant which he is to write off in 10 years, because of this provision he can get 100 per cent. written off in his computation in the first year. Therefore, he has a big advantage comparing his accounts position with his taxation liability, but he loses that advantage in the next year if the area is immediately descheduled, and there will be a charge in his accounts for the next nine years for which he will have no benefit in his computation. This involves uncertainty when descheduling takes place. To keep the advantage he gets in the first year, which is a big advantage, he has to keep expending money on capital investment and the area has to keep being a scheduled area.

Mr. Barber: I should have thought that anyone who goes to a development district either buys plant while it is scheduled or contracts to do so and he cannot lose by the fact that it was a development district while he was there. I am beginning to see the point made by the hon. Member, but I should have thought that the industrialist would have gained.
The hon. Member's third point was a criticism of the financial advantage to a company which set up in a development


district. He thought that in the example given by the President of the Board of Trade it was strange that the company could set off free depreciation against profits in the first year. He pointed out that this would apply only to a company making profits within the district or a company out of the district extending within the development district. That is true, but this would provide some incentive to a company in, say, the south of England to go north and that is an advantage.
Prior to that, we had a different type of speech from the hon. Member for Manchester, Cheetham (Mr. H. Lever). He complained that the novel principle contained in the Clause had not been fully discussed and that was why he raised it again. I remind him that it was discussed at length during the four days debate on the Budget and it was referred to again by several hon. Members during Second Reading of the Finance Bill. Again the main principle involved in this Clause which concerned the areas and their extent, whether they should consist of development districts or wider areas, was referred to by the hon. Member for West Stirlingshire (Mr. W. Baxter). This was dealt with by my right hon. Friend on the Amendment we considered immediately prior to this debate.
The hon. Members for Cheetham and Penistone (Mr. Mendelson) tend to forget that this is one, and a very important one, of the several measures undertaken by the Government to attack the problem of unemployment in certain parts of the United Kingdom. Another major proposal is the Local Employment Bill which provides for standard grants of 25 per cent. for new industrial buildings and 10 per cent. for new plant and machinery. Then there has been the increased investment by Government action.
The hon. Member for Cheetham asks why this discrimination? Why breach this fundamental tax principle? I can only reply that for some years we in this country have been bedevilled by high and persistent unemployment in a limited number of areas. This has had two consequencies, first the unhappy personal consequences for those individuals who were directly concerned in those areas, and secondly, we—I mean

not only this Government but the Labour Government before us—have been hamstrung in any action we wanted to take because in general we had to act in such a way as would affect the economy as a whole.

Mr. Houghton: I hope that the hon. Gentleman will not link the name of the Labour Party with the Government's own misfortunes.

12.30 a.m.

Mr. Barber: I was only pointing out that the problem with which we have had to deal was one which has confronted Governments before us. I agree with the hon. Member for Craigton, who pointed out that any action which one takes to deal with the country as a whole will not in itself deal adequately with these difficult areas.
The hon. Member for Cheetham described the proposal at one moment as "sentimental", at another moment as "illogical", and at another moment as "irrelevant". That is not the view of the overwhelming majority of those who have commented on the proposal in speeches in the House or outside or in the Press, and it is certainly not the view of those who live in development districts or Northern Ireland. The popular view is that this a bold and sensible proposal which is being enthusiastically welcomed.
The hon. Member for Penistone referred to the fact that the Ford Motor Company is to cease car assembly at Doncaster in my constituency and complained that he had heard no statement from me about this matter. He seemed to think that this was in some way odd.

Mr. Mendelson: I said deliberately—I do not want to provoke the hon. Gentleman, who is sitting on the Treasury Bench where he cannot speak only for the people of Doncaster—that the Minister of Labour failed to know the facts at the time and that we have had no statement from the Treasury Bench telling us about it. The Minister of Labour did not know what the company intended to do before it announced the dismissal of 2,000 people and a redundancy of 800 on 28th June.

Mr. Barber: If the hon. Gentleman wishes any further information about Doncaster, may I inform him that I have


been in touch with the Minister of Labour, the President of the Board of Trade and Sir Patrick Hennessy. Perhaps he would like to write to me if he wants further information, or, alternatively, I could send him some of my local newspapers, from which he will get all the information which he wants.

Mr. Houghton: It might appear a little discourteous if I did not say a few sentences before we approve the Clause, as I hope we shall. This is the time of night when it is easier to make up one's mind to go on to breakfast time than it is to endure the next hour. I do not think there is any need to go to breakfast time but there may be a need to endure the next hour, and I am anxious that it should be no longer than is absolutely necessary.
We have had two debates, one in the stress of circumstances and one in a more relaxed atmosphere. It is in the second debate that some of the more critical comments on the Clause have emerged, notably in the original, courageous and typical speech of my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever). There was a great deal in what he said. The difficulty is that so many hon. Members want what the Clause gives that it is not easy to look at it in a detached and rational way and to consider whether it will do the job which it sets out to do. One's point of view on the Clause is highly coloured, one is bound to admit, by whether one's constituency is within a local employment area or whether it is not.
Those who are within local employment areas are so desperate about the situation that they clutch at any straw, however slender and transient, and they are clutching at the straw of Clause 38. We hope that it will prove to be stronger than some of my hon. Friends believe. It is too early to say whether this method of inducing developing industries to go to these areas will be markedly more successful than those methods which have already been adopted.
Those whose areas are outside the local employment areas but in which there are, nevertheless, difficulties and fears about the level of unemployment, are, naturally, looking with great anxiety at the possibility of considerable tax reliefs being given to other areas—reliefs

which, they fear, may not yield the results which are hoped for them but which might, if diverted elsewhere, produce greater results.
The Chancellor said that the working of the Clause would be kept under close review. I was glad to hear him say that and I hope that he will stick by what he said. He should not hesitate to question the course he has adopted if it appears not to be yielding the desired results. One must face that fact that the so-called twilight areas—a distasteful phrase; grey areas might be better—will be looking with envious eyes on the special facilities which are being offered and added to in the local employment areas. They feel, and rightly, that help that might have been given to them to save them from further decay will be diverted into other areas and may, as my hon. Friend the Member for Cheetham said, merely alter the pattern of unemployment without eradicating it throughout the land. It will be more than they can stand if they see that they are suffering from the diversion of prospective additions to their own economies and industrial advance and, at the same time, see no strong and favourable trend towards curing our unemployment problems.
I hope that, in parting with the Clause, we will welcome it for what it does for the areas it is intended to serve. We profoundly hope that it will bring about the results which the Chancellor wants, because we all want to see those results achieved. Anything that will help to cure our unemployment problem must receive our support. At the same time, there are other areas which may be prejudiced in their own efforts towards survival as viable urban and economic units, and we must not overlook their position. We hope that good results will come out of this and other measures the Chancellor is taking and that renewed confidence will spread throughout the country. We hope that the anxieties which have weighed so heavily over some areas, and over the country as a whole, will now be removed so that we can move into a period of greater confidence and prosperity.

Mr. Dalyell: I hesitated to interrupt the Financial Secretary when he was speaking a few moments ago because I thought that he had taken the point raised by my hon. Friend the Member


for Glasgow, Craigton (Mr. Millan) about descheduling.
I accept what the Financial Secretary said about one having businessmen making rational decisions in a calm atmosphere. When one is dealing with people with highly volatile expectations, is it not possible, in the light of the volatility of their expectations, to have a time scale of, say, six months or a year before descheduling comes into force? A great deal more confidence would be engendered if such a time scale existed.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.

Clause 40.—(MOTOR CARS: AMENDMENTS AS TO CAPITAL ALLOWANCES AND DEDUCTIONS FOR HIRING.)

Question proposed, That the Clause stand part of the Bill.

Mr. H. Lever: I crave the indulgence of the Committee at this hour but, as one of the primary functions of hon. Members is to enforce some elementary logic into the examination of the Government's proposals for taxation, we ought not to part with this Clause until we have some answer as to what thought processes justified this extraordinary Clause which amends the 1961 Act. I hope that the Economic Secretary to the Treasury wilt not think that I am complaining about him personally. His moderation, charm and courtesy are very much in evidence on all these occasions, but he will forgive me if I hope that I have a more satisfactory answer this time than I had on the other Clause. It is not intellectually satisfying to hear no satisfactory answer to my argument and to hear only that there is great weight of opinion in the Committee against it. I hope that I may be recompensed by a specific, detailed answer to the problem which I shall raise now.
In 1961, as far as my memory serves, the Tory Government, remarkably enough, decided to induce its followers in the House of Commons to accept the proposition that it was somewhat distasteful to allow tax relief on Rolls Royce cars or other expensive vehicles used in the course of business. I should have

thought that the existing principle applying to tax on these matters before 1961 was sounder than the demagogic tomfoolery introduced by the Chancellor of the Exchequer in 1961. The principle prior to that was coherent and logical. It made sense that if a businessman in pursuit of profits expended money on a car or any other article necessary to the promotion of his business he was to be allowed it in computing the profits of the business. That seemed a good principle and, as far as I know. it was a principle allowed in business since income Tax came into being and expenses were allowed in computing true profits.
The Tory Party, however, induced its supporters among hon. Members to accept the proposition that when it came to Rolls Royce cars all tax principles should be thrown aside and as a matter of demagogic urgency it was necessary to have a rule of thumb which said that anybody who used a Rolls Royce for his business, whether he needed it or not, should not have a tax allowance except on the first £2,000 of his expenditure when it came to computing profits.
I ventured to ask at the time what the Rolls Royce company, which was the chief target of this penal measure, had done to incur the wrath of the people and of the Tory Chancellor that he should seek to put the company out of business in this way. Up to then I had had the impression that the company—for which I hold no brief—all other things being equal, had placed the country, if anything, somewhat in its debt and was at least owed some explanation from a Tory Chancellor in that its cars by an absolute presumption of law were regarded as an unjustified expenditure for any business in so far as they cost over £2,000. It came to the ludicrous situation that if the Rolls Royce company bought one of its own cars for the promotion of its own business it was subject to this rule. I suppose the company should have bought a Ford, a Chevrolet or an Oldsmobile.
After this piece of acrobatic demagogy on the part of the Chancellor, accepted with supine indifference by the Tory Party's own obedient Lobby fodder and perhaps with some enthusiasm by my hon. Friends who had not examined critically the logic of the proposal, the Committee passed a Resolution that anything over £2,000 was irredeemable


against profits. When one has spent that money on a motor car, however necessary it was in earning the profits of the business, however reasonable the expenditure might have been, one is not to be allowed tax relief on it.
12.45 a.m.
Incidentally, conversely, there was no objection to a man spending £2,000 on a Jaguar, for example, even though he did not prove that he needed that expenditure for his business. As long as he spent it modestly, he got it whether he proved that he needed it or not; but if he expended what the former Chancellor thought was extravagance or an undue display of opulence, he was not to be allowed this expenditure for tax purposes.
I said at the time that I could go with the Chancellor in breaching a fundamental principle of taxation that if a man proves that his expenditure was reasonably necessary for the promotion of his business and for the earning of profits, it must be set off against those profits. That is a fundamental principle of taxation law, of logic, equity, common sense and fair dealing. That principle was breached by the Chancellor.
I would have welcomed unconditional repentance by the Chancellor. There is more joy in Heaven when one sinner repenteth, I believe, than in the abundance of righteous men. Even the repentance of the Chancellor, wholeheartedly given, would have been welcomed and applauded by me. We get, however, this scurvy little measure in which, without rhyme, reason or attempt at logic, the Chancellor climbs back a little way from the demagogy of 1961.
The Committee is entitled to some explanation, because as I read the Clause —I do not have the skill of the Economic Secretary in interpreting it, but using my best endeavours at interpreting it —it has the following effect. If I buy a Rolls Royce for my business and I run it for six, seven or eight years, I get exactly the same total result as if I bought a lesser car, namely, that the whole of the expenditure on the car is allowed for tax purposes. If, however, I buy a Rolls Royce and change it every year, in computing my profits I am allowed only the amount that I would have got had I bought a £2,000 car.
In other words, the Government, having persuaded their obedient followers, and, indeed, the House as a whole, to a generalised dislike of the people who spend more than £2,000 on cars for their business, even though it may be justified in a particular case, having made a general, penal, absolute prohibition on such expenditure, have now reduced that to a conditional penalisation of those who spend more than £2,000 on a car. We are asked to assent to the position not of unconditional penal consequences to people who spend more than £2,000 on a car. We are asked to assent to a conditional state. If a man is restless and keeps changing his expensive car each year, the Government tax collector will assume that he bought a Jaguar for £2,000 or some such automobile; but if he keeps his car over a long period, he is allowed the total cost to him of the car.
I want the Minister to tell me the reason for this remarkable ruling. Why do not the Government either adhere to their original demagogy once it is passed or restore in its purity the original and reasonable principle that what a businessman expends, and proves he expends, for the promotion of his business and his profits may be lawfully set against those profits in the ordinary way. If he does not want to restore the original purity, the Minister must surely tell us why he thinks that a man is entitled to better treatment taxwise if he keeps his expensive car for five years than if he changes it every year. We are entitled to know.
Finally, I want to know from the Minister whether or not he assents to the principle that it is for the businessman to decide what are reasonable expenses to make in promoting his business and that it is not for the Government to make a general law laying down what level of expenses he may incur. If he thinks that the Government are entitled to lay down this rule in relation to motor cars, will he say why it should not be extended into other spheres? Why do the Government not determine, for example, the amount that a businessman may spend on his hotel bedroom if that is a reasonable proposition? If it is a reasonable proposition to say that a man cannot have a luxury car for his business and that in principle it will be treated differently from


another, why should not one establish the same principle for hotel bedrooms? Why do we not go on with the penal treatment and say that businessmen who go into luxury hotel bedrooms shall be treated similarly to the buyers of Rolls Royce cars?
I want to know, first, whether the Government have finally repudiated the principle that expenditure reasonably incurred in the promotion of a business and in the earning of its profits may always be set against those profits. Secondly, why do the Government discriminate between an expensive car buyer who keeps his car for five or six years and one who changes it every year? Thirdly, if the principle of allowing expenses incurred to promote business and earn profits is to he breached in relation to motor cars, why do not the Government in logic breach the principle in relation to every other form of business expenditure?

Mr. Barber: Whether or not an individual who is engaged in trade can set off against his profits the expenses of a hotel bedroom while he is travelling on the company's business is a matter concerned with the general rules governing deduction under Case I of Schedule D. Here we are concerned not with the general rules but with capital allowances, something quite different. I think that the hon. Gentleman will be the first to agree that different principles apply in these circumstances.
The hon. Member may well say that it is wrong in principle in dealing with capital allowances to take the line that my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) took in 1961 or the line which to a lesser extent is proposed in the Clause, but I do not think that what we are considering here, which is concerned solely with capital allowances, can be considered in the same context as the general rules for expenses to be set against profits.

Mr. H. Lever: I do not want to get into technical quibbles with the Economic Secretary. I think that my point was valid. However, if he relies on the technical point that this is a capital allowance, will he tell us whether the principle that expenditure incurred, and reasonably incurred, in the promotion of a business should not qualify for the ordinary capital allowances whether it is

on a motor car or plant of any other kind?

Mr. Barber: Again, obviously this is not the sort of matter that one can usefully pursue at this time of the morning.

Mr. Lever: But we are pursuing it.

Mr. Barber: But I must remind the hon. Gentleman that there are different capital allowances for different types of equipment—for example, for plant and machinery and for industrial buildings. There is no annual allowance for capital expended on commercial buildings. So far as I know, the Committee has always taken the view that it is open to the Government to provide different rules and provisions for these capital allowances. We may differ as to which is right and which is wrong.
Under the provisions which the Committee passed in the Finance Act, 1961, the amount on which capital allowances can be claimed for cars used for business is limited to £2,000. Where a business car costs more than £2,000 the initial and annual allowances given for it are those which would be due if the car had cost exactly £2,000, and, as the hon. Gentleman will be aware, there are provisions for balancing allowances and charges. I well remember during the debates in 1961 making it clear that the Government had no wish to deter people from using the more expensive types of car, which I am sure the hon. Gentleman will be the first to agree are a credit to the motor industry and which I believe are of considerable prestige value to British engineering generally.
There can be little doubt that the way in which the 1961 provision worked has been unfair to those who manufacture the more expensive cars. Indeed, my right hon. and learned Friend the Member for Wirral last year promised that he would give further consideration to the provision, which had been introduced only the year before. The unfairness arises simply because the more expensive car lasts longer and keeps its value better than the cheaper car. This is not recognised or taken into account by the £2,000 limit.
Perhaps I could give a short and concrete example. Mr. A buys a Rolls Royce for, say, £6,000, keeps it for six years and then sells it. He may spend no more


in total than Mr. B who buys a new £2,000 Jaguar every two years. Over the six years Mr. B's cars, the cost of which will also amount to £6,000 in total, may bring in no more than Mr. A gets after six years. The Jaguar buyer, in fact, will not be restricted at all by the 1961 provision, whereas the Rolls buyer's total allowances will be only one-third of what they would otherwise have been.
This has been shown to be unfair. I should have thought that the hon. Gentleman would give the Government a little credit for looking at this again and for deciding, in the light of experience, to remedy the position. What we are trying to do is to meet the unfairness while still preserving some restriction on expenditure on cars allowed for purposes of capital allowances. This is done by imposing a limit on depreciation allowances given in respect of cars.
These allowances are not to exceed certain specified annual amounts. The overriding limit on the total allowances imposed by the Finance Act, 1961, will disappear and the effect of this new provision will be that, providing a car costing over £2,000 is kept long enough, relief will eventually be given in reasonably yearly amounts on its full cost. But it will not be possible, as it was before 1961, to get allowances at 55 per cent.-30 per cent. initial allowance and 25 per cent. annual allowance—on the cost of the expensive car in the first year.
The main features of this proposal are as the hon. Gentleman has interpreted the Clause. In the first place, the first year's allowance for a new car costing over £2,000 will be limited to the same figure as at present under the 1961 legislation—that is to say, £1,100 made up of £600 in initial allowance and £500 by the first year's annual allowance. For subsequent years, there is to be a limit of £500 on the annual allowance for a car if the allowance would otherwise exceed that amount. The £500 limit will continue to operate only because the written down value for tax purposes is less than £2,000. Thereafter, the normal 25 per cent. annual allowance will be less than £500 and given without restriction. The normal provisions for balancing allowances and charges will follow on the consequential provisions I have referred to. I do not think that I need go into that.
1.0 a.m.
I believe that the new scheme is fair as between one type of car and another and that it is right that my right hon. Friend should have introduced it in the light of the way in which the 1961 legislation has worked out in practice, and I commend it to the Committee.

Mr. Diamond: Will the hon. Gentleman explain subsection (8), which refers to hiring? So far he has dealt only with outright purchase.

Mr. Barber: The hon. Member will recall that in the 1961 Act we had to include certain provisions which were not directly relevant to what we were trying to do, but which were concerned with the hiring of cars and which were to prevent avoidance. When my right hon. Friend was considering what relaxation he might make in the capital allowances in respect of the purchase of expensive motor cars to meet the sort of anomaly I have mentioned, he had also to consider whether it would be necessary to make any change in the provisions about hiring.
He concluded that it would be unfair to leave the provisions relating to hiring as they were in the 1961 legislation, because in that event the hirer would be penalised, whereas all we wanted to do in this Clause, as in the 1961 legislation, was to prevent avoidance of the main provisions by somebody simply hiring a car instead of purchasing one. If the hon. Member would like me to pursue the matter, I have the details of the way in which subsection (8) works, but I can assure him that the main purpose in dealing with hiring at all is to prevent avoidance of tax. All we have tried to do is to amend the provisions relating to hiring in such a way as to make it fair and reasonable, as we tried to do in the 1961 legislation.

Mr. H. Lever: I am sorry to weary the Committee but I must underline that the two points which I raised have been answered in the most extraordinary manner. I asked whether the Government were satisfied to continue to breach a principle, namely, that where one spends money for the purpose of one's business and for earning a profit, the only test for deciding whether that expenditure should rank for allowance in Income Tax assessments should be the reasonableness of


that expenditure. I had no reply to that. The Financial Secretary sought to side-step it by saying that it was not an expenditure for the purposes of business of an ordinary kind, but was capital expenditure. Without discourtesy to him personally, I can only say that that is an unworthy quibble.
This was underlined by my hon. Friend's question about hiring. If someone hires a Rolls-Royce, under the 1961 Act he is making an expenditure not of a capital character but of a current income character in earning his profits, and it was disallowed for the same reason and on the same principle that capital expenditures were disallowed.
As a question of principle, does the hon. Gentleman think it right to continue in any form the principle annunciated by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), namely, that the Government should rule arbitrarily and at fixed amounts that certain capital expenditure or income expenditure should not rank fully as against profits, irrespective of whether it was reasonable to make that expenditure, but simply on an arbitrary amount of the expenditure? I had no answer to that question other than an unworthy quibble.
Some of my hon. Friends have given the impression that tonight I am pleading the case for the oppressed Rolls-Royce car owner, that I am seeking to wring tears of sympathy from hon. Members on behalf of the owners of Rolls-Royce car owner, that I am seeking to of reason and logic should be applied in taxation, and that if there is any demagogy or unfairness it should be exposed. The fact that a man owns a Rolls-Royce car does not disentitle him from the application of the ordinary principles of logic and fairness in the application of taxation principles which are well established in this country and have existed since Income Tax came into being, which were abrogated by the former Chancellor of the Exchequer, and which are being only partially and illogically restored by the present Chancellor of the Exchequer.
I feel that it is my duty to underline the fact that in answer to my first question, "Are the Government ashamed of the disgraceful and demagogic provisions of the 1961 Act, and are they attempting to restore the original principles of our tax laws which were sound?", I was

treated to an unworthy quibble about capital expenses and the like.
My second point was to ask what was the logic behind this amendment of the law relating to expensive cars. The effect of it, as the Financial Secretary agrees, is that anybody who keeps one of these expensive cars for a number of years will be treated as he would have been treated for all practical purposes before the 1961 Act, and the person who buys an inexpensive car and changes it every year will be penalised as before under the 1961 Act.
The reason given by the Financial Secretary was not a quibble, but an outright piece of nonsense. He attempted to persuade the Committee that if a man had a Rolls-Royce car and kept it for five years, his total depreciation over the period would be the same as in the case of a man who bought a Jaguar and changed it every year. This is untrue. This is an attractive argument, but it is pure bunkum. A man who buys a Rolls-Royce and keeps it for five years sustains a vastly greater depreciation than a man who buys a Jaguar and changes it every year.
I am not in the motor car business, and I am not especially good at mathematics, but every schoolboy knows that it is more expensive in terms of depreciation if a man owns a Rolls-Royce car costing £8,000 than if he owns a Jaguar car costing £2,000. Therefore, the excuse for this shabby little climb back from the 1961 nonsense will not stand up to examination, and we are left without any explanation for a ludicrous amendment of the law, the effect of which will be that a man can run an expensive car without any penal tax consequences as long as he keeps it for a number of years, but if he changes it every year, although it makes no difference in the long run, he is penalised with the original demagogic purity of the 1961 Act.
I think that the Clause is reprehensible, even more reprehensible than the 1961 Act. It is lamentable that no hon. Gentleman opposite has demanded some logic or explanation from his Government for this remarkable situation.

Mr. Diamond: The hour is very late, but, nevertheless, I seek to detain the Committee for a few minutes on this


Clause because we are unhappy about it.
I start with the words of the Chancellor in his Budget speech. I do not propose to quote them exactly, but he thought that in introducing this new provision he was preserving the basic purposes of the original proposals. He led us to believe that by this amendment of the 1961 Act he was removing the misfortune to which Rolls-Royce were being put, but, at the same time, was helping and sustaining the main objects of those proposals, namely, to prevent extravagant ostentatious expenditure being incurred.
I am not sure that his purposes have been achieved. We have been given, by way of example, the case of a man who buys a £6,000 ear and changes it once in six years and the man who buys a £2,000 car and changes it every year. It has been shown that the same depreciation allowance is given, whereas before a different allowance would have been given. The Parliamentary Secretary referred to this example in his Second Reading speech. On every occasion when a Government spokesman has referred to this subject he has been careful to avoid giving an example of what the balancing charges would be, no doubt to avoid complication, but my suspicions were aroused immediately I heard the Government explanation, and they have been reinforced by the knowledge that the suspicions of my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) have also been aroused.
Neither he nor I have the advantage of knowing the secondhand value of Jaguars which are two years old, or Bentleys or Roll-Royces which are six years old, but my strong suspicion is that the example given is completely misleading, because it does not tell us what we want to know. We want to know not what the comparison between these two cars is in terms purely of capital allowances, but the difference between the cost to which the Inland Revenue would be put—that is to say, the amount of tax it would have had to allow and the amount of tax which it will allow, which is at the moment being borne by the taxpayers in general. None of us, without the help of the Government, could give a precise indication of the

secondhand values, and, therefore, the cost to the Treasury, in the circumstances outlined.
As I was unable to do that I took the only course open to a person who can add up but does not know anything about secondhand values. I looked up the cost, because it seemed that we were not likely to be saving the Inland Revenue much by the proposals in the Clause. The Clause affects the tax position to the extent of £2½ million. According to the Financial Statement, in a full year this proposal will cost the Revenue that amount. That is not a very great amount—until we look up the 1961 provision and find that the original proposals were designed to benefit the Treasury by the large sum not of £2½ million but £3 million.
In other words, there has been a variation in the estimate of £500,000, which can surely be omitted for this purpose. Nobody can say, at a particular point of time, that the estimate of £2½ million was dead right, or that the estimate of £3 million was dead right. For all practical purposes the two figures are the same.
My suspicions have been confirmed that the Government have said one thing and are doing another. This is a very difficult thing to say unless one is capable of proving it. The Government have said, through the Chancellor, that they are observing the basic purpose of the original proposals, but what they are doing financially is precisely the opposite they are throwing them away completely. They are giving back the £3 million or £2½ million which was being saved by the original proposals. Unless there is anything wrong in the Financial Statement—and the Treasury is responsible for that—what I charge the Government with is justified. That is why I was anxious that the Government should be a little more forthcoming about subsection (8).
1.15 a.m.
We have not had a word about the hiring. We recollect what happened in 1961, when the Chancellor of the day mentioned in his Budget speech that he was proposing to do this and he gave the reasons. Immediately—my recollection is that it was the very next day—there appeared advertisements in The Times from well-known suppliers of Bentley cars, stating, "Why should you


bother about the Budget proposals limiting the purchase of Bentley cars when you can hire them from us and get away with the full hiring charge?"
This was followed by a proposal in the Finance Bill, and it subsequently became law, that the purposes of the provision could not be avoided by hiring as opposed to buying. Hiring limitations were brought in, to prevent the circumvention of the proposal, that for a car which might have been bought for £2,000 the maximum travel expenses would be £2,000 and if the car was hired there would be only a proportionate charge—£2,000 on a £4,000 car and up to X amount for the hire. Half of X would be allowed.
I fail to see, therefore, and it has not been explained, why it is necessary to increase the amount which may be paid by way of hire. I appreciate that the Financial Secretary said that he had the details and would be willing to give an explanation were he pressed to do so. But I still make the point that the explanation has not been forthcoming so far, and mention would not have been made of it had I not asked about a particular subsection.
At present, we have a provision under which instead of limiting the figure to £2,000, it is £2,000 plus half of the excess. I understand that in the case of a car costing £4,000 the hire charge would be limited to a proportion based on a fraction of which one side would be the full cost of the car and the other £2,000 plus half of the excess—threequarters of the total instead of one half. I fail to understand why the Government should wish that a person who wants to avoid these proposals should be able to increase the hire charges for tax purposes from a half to three-quarters in an example such as I have given. That is one reason why the Financial Statement shows that the benefits obtained for the taxpayer under the 1961 proposals are being wholly returned.
I wish to return to the principle referred to by my hon. Friend the Member for Cheetham. He will be pleased with what I say at the start. But he will be very displeased with what I shall say subsequently. He will be pleased when I say chat I agree with him that it is a mere quibble for the Financial Secretary

to try to maintain that there is any difference between the principle adopted in treating certain items as liable because they are deductions under Case 11 in the ordinary way of expenditure as compared with the capital allowances which come under a slightly different part of the Bill arid are something different in nature.
It is not whether we calculate the amount to be allowed by reference to the amount the taxpayer pays or whether we calculate it by capital allowances which is merely a method of getting what the taxpayer pays over a period. There is no difference whatever. My hon. Friend will not mind my saying that, although I think that he is right in drawing attention to this fundamental breach of principle, I and my hon. Friends regard it as a most important breach of a principle which must be maintained.
I agree with my hon. Friend that this, so far as I am aware, is the only case in which the Revenue departs from its normal principle. The normal principle for the Revenue in dealing with assessments of business is to say that it is for the businessman to make profits or losses and to run his business as he thinks fit. It takes no share in running his business and expresses no opinion on how he runs it, but collects its share of the profits he makes. The case of luxury, ostentation, extravagance in using cars which are more expensive than necessary for the efficient conduct of the business, which adds status, dignity, a feeling of comfort, is one example—there are others—of how businessmen have gradually built up a standard of extravagance which, sooner or later, the State has to come in and limit in some way. The Financial Secretary is smiling, but the Government have limited it and were the first to do it. They quite properly did it two years ago.
These various expenses have been challenged for some time. The normal way in which the Government have attempted to deal with the matter was to see that businessmen did not get expenses to which they were not entitled. The Revenue and taxpayers have been put to considerable trouble and the net result of all that trouble has been that the amount of tax collected has not varied very much in this respect and travelling and entertainment expenses have gone on in this increasingly ostentatious way. The only way to put a limit to it was


for the Revenue to step in and say, "This has gone far enough. We agree that people must have motor cars to run their business. They can run them satisfactorily with a £2,000 car, they do not need a £4,000 or a £8,000 car."

Mr. H. Lever: My hon. Friend is saying that it is necessary to have legislation so that when a Rolls-Royce car is an unnecessary extravagance it should be disallowable in computing profits of a business, but surely if the Rolls-Royce is in any particular case an unnecessary extravagance, that is caught by the general law on tax computation and is disallowable in any event.

Mr. Diamond: My hon. Friend is thinking of the farmer who had the benefit. That is a very special case and it is not the normal case at all. There is no question whatever that the Revenue is absolutely powerless to prevent practically every man now running a £1,000 car having a £6,000 car and charging it against his business profits.
The only way to set a limit was the way it was set in 1961. That is a very important principle and we regard it as equally important as the Government did at the time. We are most anxious that that principle should not be forgotten or lost, or that it should disappear as it seems to be disappearing if one looks at the purely financial figures involved. It seems to be maintained up to a point in the amended proposals before us, but we feel very unhappy about it. It is too late to go into this in any great detail, but we want to reserve the right, although we shall let this Clause go, to come back to it on Report, if necessary, to amend it in any way which on closer examination may seem necessary.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 41 ordered to stand part of the Bill.

Mr. Houghton: I beg to move, That the Chairman do report Progress and ask leave to sit again.
The Finance Bill is rather like the Bible; we get through a chapter at a time. We have reached the end of Chapter III, and if we break off now we shall have the whole of Chapter IV to do, and

we can hope to finish the Bill on Thursday and to start the new Clauses on Monday. That is our hope and intention on this side of the Committee, and I hope that it will be satisfactory to the Chancellor.

Mr. Maudling: I am a little disturbed by the fact that today we have covered only nine Clauses and there are no fewer than 28 more to cover. It will be for the general convenience if we finish the Bill on Thursday and start the new Clauses next week, but it is not always convenient for hon. Members to sit late on Thursdays and I should very much like to conclude the Bill at a reasonable hour on Thursday. We should be more likely to achieve that if we completed Chapter IV. [HON. MEMBERS: "Be reasonable."] I am being reasonable.
We have spent rather a long time arguing Clauses to which there has been no opposition, and if we leave ourselves 28 Clauses for Thursday I think that that will be less convenient than taking the next few Clauses now. We could quickly run through the miscellaneous provisions in Clauses 42 to 48, and start on the Estate Duty provisions, in Part III, and the Stamp Duties provisions, on Thursday. It would be more convenient if we did it that way.

Mr. H. Lever: I am surprised at the Chancellor, because he was courteously present when the Economic Secretary explained that it was too late to give the Clauses the attention which they required when I raised points which were not so complex as the points which will inevitably arise if we proceed now. He candidly admitted that it was too late for us to discuss these complex matters in detail. He shakes his head, but if he reads HANSARD he will find that that is what he said.
I do not want the Chancellor to impose the unfair burden not only on the Economic Secretary but on all of us of giving attention to these complex points and destroying the ridiculously illogical arguments put forward by the Government. The Chancellor enjoys a great measure of good will. We have great admiration for his talents and his courtesy to the House. I feel that he will further his own case and promote the speedy handling of the Bill if he accepts my hon Friend's very reasonable request.

1.30 a.m.

Mr. Mitchison: I feel rather hard done by over this. I omitted to ask the Government searching questions about what happens if one has a hovercraft instead of a motor car. I feel that they ought to keep up with the times, if they are to look into the 1970s; they are a forward-looking party. But we did not hear a word about that, only about motor cars. They are quite out of date.
Taking the matter more seriously, must the Chancellor do this? These are not lengthy Clauses, and he will see that there is little in them or in the Amendments. I cannot claim much experience, but I have been through many Finance Bills, and, looking through the Bill, I began to wonder whether we might not run dry on Thursday if we went on much longer. There is a substantial point about Estate Duty and another about Stamp Duty. They are fascinating subjects, but they do not have the local interest and excitement attaching to some of the matters we have discussed today.
I appeal to the right hon. Gentleman to accept what is as good an offer as we can make from this side of the Committee. I am sure that my hon. and right hon. Friends will do their best to see that we get the Bill by Thursday. We cannot guarantee these things, but we can try.

Mr. Maudling: I am trying to consider the convenience of the Committee and, as I have said, it would be a pity to have to sit until a very late hour on Thursday to finish the Clauses of the Bill. I recognise that no guarantees can be given in these matters, but I have the impression from what the hon. and learned Member for Kettering (Mr. Mitchison) was saying that there would be an effort made on both sides of the Committee, if we ceased now, to deal with the remaining points on the Clauses of the Bill on Thursday by a reasonable hour.
There are some important points—Stamp Duty, for example—but otherwise I think that it would be generally agreed that, while there may be matters for immense speech making, it would probably not be necessary for there to be a compulsion on hon. Members to make immense speeches on the remaining 28 Clause. I think that if we resolve on both sides of the Committee to make a

real effort to complete the Clauses of the Bill by a reasonable hour on Thursday, then, in that spirit, I would be prepared to accept the Motion.

Mr. Houghton: I have given that assurance on several occasions. There has never been any doubt as to our intention to try to finish the Bill at a reasonable hour on Thursday. Who knows, my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) may not turn up.

Question put and agreed to.

Committee report Progress; to sit again this day.

Orders of the Day — TRANSPORT (MECHANICALLY PROPELLED VEHICLES)

1.33 a.m.

The Parliamentary Secretary to the Ministry of Transport (Mr. T. G. D. Galbraith): I beg to move,
That the Pedestrian Controlled Vehicles Regulations 1963, dated 9th May 1963, a copy of which was laid before this Home on 14th May, be approved.
These Regulations are made under Section 10 (5,b) of the Road Transport Lighting Act, 1957, and Section 254 of the Road Traffic Act, 1960. These Acts empower my right hon. Friend the Minister of Transport to specify mechanically propelled vehicles which shall be treated as not being motor vehicles.
The effect of these Regulations is that mechanically propelled vehicles controlled by a pedestrian and having an unladen weight not exceeding 8 cwt. shall be treated not as motor vehicles, but as hand propelled vehicles and their drivers will not he required to have driving licences. There are also some other effects; for example, although we expect that most operators will continue to effect third party insurance, this will no longer be compulsory. The lighting regulations will be slightly less stringent. For example, these vehicles will need to have only one rear light or reflector instead of two.
A third change is that the vehicles will cease to be subject to the Construction and Use Regulations which govern, for example, requirements as to braking efficiencies. On the other hand, these vehicles will continue to be motor vehicles for the purpose of Part IV of


the Road Traffic Act, 1960, which deals with the regulation of goods vehicles and carriers' licences and gives vehicle examiners powers of inspection which include the right to prohibit the carriage of goods by a vehicle which they consider unfit for service on account of any defect. This constitutes a valuable check on road-worthiness and is an important safeguard to have retained.
Other statutory provisions which will continue to apply are those of the Vehicles Excise Act, 1962, under which vehicles must be registered and licensed for purposes of revenue and identification. My right hon. Friend considered the matter of weight very carefully and eventually decided that an unladen weight of 8 cwt. is the right weight at which to draw a distinction between vehicles which are and those which are not treated as motor vehicles. It would have been possible, of course, to specify a greater weight, but my right hon. Friend thought it wise to start at this lower weight because the change means some relaxation in the precautions which have been thought proper until now for anything that is mechanically propelled.
In considering safety it must be remembered that none of these vehicles can exceed a walking pace, and although no statistics of accidents in which they are involved are available it is believed that the number is small. Their drivers, of course, will still have to observe the normal traffic regulations, although they will no longer be required to have driving licences or to pass a driving test. A further point is that the number involved is not great—about 3,500 as far as we can judge, which is very small compared with the total of all vehicles on the road at any time. The majority of them are milk floats, but some are used for such purposes as delivering bread, collecting refuse and street sweeping.
Naturally, before deciding on this change my right Friend consulted a number of representative organisations, including the appropriate bodies which represent manufacturers, operators and local authorities. The majority of these bodies are agreeable to this measure but there were some objections on the ground of road safety. My right hon. Friend considered these carefully but decided

that the new Regulations, for the reasons I have given, are unlikely to, lead to a serious loss of road safety. In any case, the Regulations are strictly experimental. A further extension would need to be looked at in the light of experience. I should like to make clear to the House that if in the event adverse consequences result from these new Regulations my right hon. Friend will have no hesitation in asking the House to revoke them.
As the House is probably aware, the Regulations came to be considered as a result of representations made by the hon. Lady the Member for Blackburn (Mrs. Castle). She did this on behalf of Mr. David Crane, who was threatened with losing his job as a milk roundsman because he was unable to pass the driving test on account of defective eyesight. The vehicle which Mr. Crane formerly operated will benefit from these Regulations and he will be able to resume his job as a driver and roundsman if Parliament approves these Regulations. This is a satisfactory outcome of a small but fairly complicated problem which has taken some time to solve.
I commend the Regulations to the House not only as a benefit to an individual, but, in general, as a means of relaxing legal controls in a sphere in which they do not appear to contribute anything to road safety.

1.40 a.m.

Mr. R. J. Mellish: We on this side welcome the Parliamentary Secretary to his new post. He can be assured of our good will and, provided that he is not too political and contentious, of a great deal of support if he brings in Regulations of this kind. We are happy that the recent experiences that the hon. Gentleman has had are well behind him and that he has now settled in to what must be one of the most interesting Departments in the Government, a Department which probably works harder than most others. Certainly, the Minister has to work hard, and junior Ministers, I believe, have to work fairly hard, too, although, to listen to the Minister of Transport, there are times when one would think nobody but himself did anything.
The hon. Gentleman was right to pay tribute to my hon. Friend the Member for Blackburn (Mrs. Castle). Tonight is


quite a triumph for her, because it was on 17th July last year that she first raised this mater. She had discussed it with some of us who are interested in transport matters and she put down a Clause on the Road Traffic Bill to bring to light the problem of one of her contituents. The then Parliamentary Secretary conceded that there appeared to be an injustice and that the rigid rules for obtaining driving licences were being applied to people who were not responsible for vehicles which could be confused with those to which the strict rules governing driving licences applied.
Because her constituent was hurt by the injustice, my hon. Friend not only put down the new Clause, but when the Parliamentary Secretary said that the matter would be looked at she followed it through with a considerable number of letters. Basically, my hon. Friend is responsible for the fact that we now have the Regulations before us. It is the duty of any back bencher to fight for what he or she believes to be right. If success can be achieved in this way, a good job is done. I congratulate my hon. Friend, whose constituent has been well served.
This situation reveals, however, anomalies concerning a considerable number of other mechanically-propelled vehicles which are affected. We shall want in due course to know how many other of those vehicles are still affected by driving licences. I take the Minister's point that road safety is all-important, but he must be prepared for our coming back again in the not too distant future when the present scheme has had a chance to operate, when we will try to find whether it can be extended.
In our desire for safety upon the roads, none of us wants to impose unnecessary restrictions on the people who are affected in this matter. We need to maintain a sense of proportion. We on this side welcome tonight's proposals, and I am delighted that this is the beginning of a reasonably short career for the Parliamentary Secretary—he will understand what I mean—on the benches opposite and at the Ministry of Transport.

1.43 a.m.

Mrs. Barbara Castle: This is indeed a happy night for me and for my constituent, Mr. David Crane, and I thank the Parliamentary Secretary and my hon. Friend the Member

for Bermondsey (Mr. Mellish) for the kind references which they have made to me. Thanks are, however, due to a whole complex of people, because this has been a joint operation by the people of Blackburn, the national Press and Members of this House in going to a lot of trouble to rectify an injustice which, although it may affect only a small number of people, is none the less real for those whom it affects.
1 think of all the people in Blackburn who rallied round David Crane, including the 4,000 ordinary men and women in the street who signed the petition on his behalf, and the Blackburn Methodist Mission, who sent in a testimonial of support for him. I received letters from individuals, and the matter was taken up by the Press. Tribute must be paid to the way in which the Press brought this anomaly even more vividly into the light of day and so compelled us to find a way of dealing with it.
I pay tribute, also, to David Crane's employers, Palatine Dairies, who have kept him on their payroll all this time although the poor lad has never been allowed to put his hand again to his float, because he could read a number plate, not at 25 yards, but at 21 yards.
I understand that these Regulations are experimental, but I can assure the Minister that David Crane and his milk float will he no threat to road safety at all. Indeed, one of the people who gave him a testimonial of support was the Chief Constable of Blackburn, whose traffic policemen had watched David circulating round the town and testified to his great carefulness and road sense.
This is the end of a very protracted battle of eleven months, but better late than never. I appreciate that some of the delay was due to the fact that the hon Gentleman's predecessor fell ill. I join my hon. Friend the Member for Bermondsey (Mr. Mellish) in welcoming the new Parliamentary Secretary and wishing him well.
I would conclude by saying to the hon. Gentleman that he has made a very good start tonight, and I hope that he will continue on the same good course and always give me what I ask for when I raise these matters; and will he please ensure that next time it does not take quite so long? As the hon.
Gentleman is well aware, I already have another little proposal that I want to introduce to amend another anomaly, one affecting Mr. Parkinson, of Blackburn, a war disabled man who is being forced to pay an absurd and excessive fee for his driving test for his invalid carriage. The Minister has looked at the—

Mr. Deputy-Speaker (Sir Robert Grimston): Order. I am sorry to interrupt these pleasant exchanges, but the hon. Lady must not pursue that matter on these Regulations.

Mrs. Castle: I was just concluding, Mr. Deputy-Speaker. The Minister already has this matter under way, and I hope that the experience that we have had tonight is an augury of good things to come in other cases which I shall bring to his attention.
Finally, I would ask that the remaining stages of Parliamentary approval of these Regulations in another place shall be hurried through as quickly as possible so that David Crane can get on to his milk round again without any more delay.

Question put and agreed to.

Resolved,
That the Pedestrian Controlled Vehicles Regulations 1963, dated 9th May 1963, a copy of which was /aid before this House on 14th May, be approved.

Orders of the Day — PLANNING AND DEVELOPMENT, NORTH BUCKINGHAMSHIRE

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Batsford]

1.48 a.m.

Major Sir Frank Markham: I would much rather be asleep at this hour of the morning than be making a speech in the House of Commons, but this is the only way in which, and perhaps the only time at which, I can raise a matter which has been rather baffling to many people. The subject is the planning and development of north Buckinghamshire, which I have the honour to represent in the House.
One of the outstanding features of our pleasant corner of Buckinghamshire is the way in which the River Ouse meanders

through it and its various tributaries help to create a vision of pastoral beauty such as is excelled by very few other counties. Nevertheless, there is in this fair land quite an element of discontent in the town of Wolverton, where the British Railways Carriage and Wagon works are situated. Up to quite recently one might say Wolverton has been famous throughout the world for nearly a century because of its railway genius and skill.
But over the last fifteen years the working population in the railway workshops has declined from 4,200 to 2,800. There is no alternative industry. This, of course, has meant not only an appreciable decline in the number employed in the town, but also a decline in the prosperity and the population of the area. Wolverton has sought by every practical means to attract new industries, but each time it has been faced either with a direct refusal, or with the threat of a refusal, of the necessary I.D.C. from the Board of Trade.
Yet while Wolverton is not allowed to have a new industry to make up the loss of jobs in the railway workshops, there is, within seven or eight miles of it, the town of Bletchley, also in the River Ouse area—I want to emphasise the river because it is sometimes argued that Wolverton must not expand because it is in the upper Ouse catchment area.
Ten years ago Bletchley was made an overspill town for London. Since then, its population has increased from 11,000 to 19,000. It is going ahead very fast. I am delighted that it is and I hope that this development, which began with the approval of my right hon. Friend the Prime Minister when he was Minister of Housing and Local Government, will go ahead as fast as anything that we have heard about in today's debates.
However, it seems unfair that whilst one town in my constituency should be given every encouragement another town, eight miles away, is smacked down every time it tries to get a new industry in compensation for the loss of work in the railway workshops. Bletchley has had 25 industrial development certificates during the last three or four years. These include seven which cover entirely new industries. In all, there is provision for 1,500 new jobs. Wolverton does not want to emulate Bletchley. It does not want


to expand by 10,000 or 20,000 population. All it wants is a moderate development, perhaps a total of 500 jobs, bringing its population up from 13,000 to 15,000. Thus, a couple of I.D.C.s could make good the loss of work at the railway works.
Bletchley, of course, has had to build new schools, new houses, new roads and new sewerage farms for its developments. But Wolverton has empty houses and empty places in its schools. It already has all the other facilities a small township needs. The Ministry of Education spent £750,000 in building the new Radcliffe School, the College of Further Education and other colleges and schools in the vicinity. It is one of the best equipped towns educationally in the South Midlands. Yet it is a declining area with vacant places in those schools.
Rightly, Wolverton asks why it cannot have an additional industry or two and an increased population which will be able to use the facilities already there. It does not ask to swell to the size of Bletchley. It only wants a moderate development and has already taken steps to try to secure it. As is generally known, the town has already applied to the L.C.C. for its consideration and help and the L.C.C. has, not once but four times, reiterated its desire to help Wolverton to become an area
for moderate expansion under the Town Development Act. 1952.
But the L.C.C. minute of 12th February, 1963. significantly added that before the L.C.C. could do anything, Government approval was necessary. That is the point of my comments tonight. I want Government approval to be given to the link between the L.C.C. and Wolverton, so as to secure a moderate expansion of an area which is ready for it and which deserves it.
Also in my constituency is the town of Olney, which has quite reasonably asked to be allowed to expand from a population of 2,700 to approximately 4,000. Permission has been refused and Olney is not to be allowed to develop. On the other hand, a few miles away is the township of Towcester, which is in the constituency of my hon. Friend the Member for Northants, South (Mr. Arthur Jones) and which has also asked to be allowed to increase from 2,750 to 5,000. Towcester is in the same river

catchment area and in the same sort of countryside. Olney is turned down, but Towcester is approved.
These decisions make one wonder how crazy our planners can get. Who decides that one small township should have the green light and the other the everlasting red? These decisions puzzle us greatly. I am certain that, with his known sympathetic attitude towards planning and development, my hon. Friend the Parliamentary Secretary will be able to show us a way out of this impasse both for Wolverton and Olney. We are not asking for the moon, but for appropriate, reasonable and moderate developments, and I hope that my hon. Friend will be able to point out some way in which these recurring negatives for both Wolverton and Olney can be overcome and we can get the green light for good development in a very pleasant and lovely part of England.

1.58 a.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. F. V. Corfield): I appreciate the concern of my hon. and gallant Friend the Member for Buckingham (Sir F. Markham) for his constituents and I would not wish to minimise their anxieties or his, but there seems to be some misunderstanding as to the basis of planning problems and planning procedures. It is important to remember that the primary responsibility for planning an area rests with the local planning authority, which in this case is the Buckinghamshire County Council.
In accordance with the statutory requirements, Buckinghamshire County Council submitted a development plan to the Minister and marked on it certain areas which would be dealt with by way of a separate town map. In this area the town map for Wolverton included areas of Stony Stratford, Wolverton itself, New Bradwell, all in the Wolverton urban district. and some parts of Newport Pagnell rural district.
This town map was certified on the Minister's behalf at the end of 1959 and it is due for review in the ordinary quinquennial cycle early in 1965. The written statement with the town map provides for a population increasing in the period 1951 to 1974 from about 14,300 to 15,780. As my hon. and gallant Friend said, the


population has gone down somewhat. I cannot give an accurate set of figures because the census figures refer only to the whole urban district and that is not coincident with the town map, but the population appears to have gone down by about 400.
In this town map, amongst the major proposals was the retention of 109 acres of land allocated for industry, which I assume to be almost entirely the railway workshops, and an additional five acres for further industrial development. I am sure my hon. Friend will recall that when the town map was available for discussion and objections and so on the Wolverton Urban District Council did not raise any objections to the town map itself, although I appreciate that that was probably before there was fear of the run down of the employment provided by the railway workshops.
In 1962, the urban district council began to grow anxious about the prospect of unemployment, and it suggested to the Buckinghamshire County Council that the position should be inquired into with a view to taking the necessary steps to amend the town map and arrange the importation of new industries. I understand that this request was in the form of a letter addressed to the county council, quite properly, as the responsible local planning authority. Copies were sent to my Ministry and to the Board of Trade.
It is important to make the point that an I.D.C. is an absolute pre-requisite to planning permission. It is laid down in the Act that my right hon. Friend the Minister is not even empowered to give planning permission for industrial purposes for an area over 5,000 sq. ft. unless the application is accompanied by an up-to-date I.D.C. issued by the Board of Trade.
So far as my researches and my inquiries from the Board of Trade go, there has been only one application for an I.D.C. to the Board of Trade in regard to development at Wolverton. I understand that this was a sizeable development. A firm applied for initial permission for 300,000 sq. ft., with the object of expanding that to about 1 million sq. ft. by 1966.
I understand from my hon. Friend the Parliamentary Secretary to the Board of

Trade that the reasons for refusal were due almost entirely to the fact that it was felt that this sort of development should be channelled, if possible, to one of the development districts under the Local Employment Act, bearing in mind that in the North-East and other development districts there are unemployment figures of 5 and 6 per cent. whereas in this area the unemployment figure is only 0·8 per cent. I think, therefore, that my hon. and gallant Friend will appreciate that, disappointing as this may be to him and to the people of Wolverton, there are pretty strong claims elsewhere for industrial developments of this sort.
As regards the present planning position, the approved town map makes provision for some small increase in the population and for new industry. The urban district council has suggested that the town map should be reviewed with the object of increasing the allocation for industry, but there is no procedural or statutory bar to action being taken in the meantime for an application to be put in for planning permission for development of some land which is not necessarily now included in the town map as allocated for industry.
In other words, it is open to any firm wishing to move to Wolverton to put in an application, and of course the Buckinghamshire County Council would forward this to my right hon. Friend simply because it represented a departure from the development plan. But there are no reasons that we know of why there should be an automatic refusal of that permission. We have no records of any refusals up to date—anyhow, in reasonably recent times. My hon. and gallant Friend should, therefore, not be too despairing about the prospects of planning for further industrial development.
The problem is first to catch the firm, but when a firm has become interested in developing at Wolverton, and has had the opportunity to obtain the necessary land, although I would not wish to prejudge any planning appeal there are no reasons that I know of why it should be assumed that planning permission will not be forthcoming, bearing in mind all the time that we are statutorily barred from considering an application—as is


the county council—if it is not accompanied by an I.D.C. obtained from the Board of Trade.
As for the town development scheme, my hon and gallant Friend has referred to applications to, or negotiations with, the L.C.C. Again, although I have had the necessary researches carried out, I can find no trace of any application to my Ministry for the approval which was mentioned by my hon. and gallant Friend in quoting from the L.C.C. minutes. We would certainly not close our minds to the suggestion of a moderate town development at Wolverton, with the warning that town development schemes operated by relatively small authorities give rise to certain difficulties, and where they have been operated successfully it has been almost universally as a result of close co-operation with and a good deal of financial assistance from the county council concerned.
If the Wolverton Urban District Council is still anxious to take part in a town development scheme, its first move should be to discuss the matter with the Buckinghamshire County Council and from then move on to triangular negotiations with the County Council and the London County Council. There again, if arrangements can be made between the three local authorities concerned—the exporting authority, the county, and the importing urban authority—my right hon. Friend will most certainly consider the whole proposals on their merits, and with no closed mind towards them.
We are anxious to increase the contribution that town development can make

towards solving the overcrowding problems and the difficult land problems in the tighter conurbations, especially around London. I have looked at the case carefully, and cannot find any trace of any action on the part of the Ministry which would give rise to a fear that we have set our minds against any form of development at Wolverton.
My hon. and gallant Friend mentioned Olney and Towcester. Here again, I understand that the planning proposals were put forward to the county councils, which dealt with them entirely within their powers. There was no question of these proposals going to my right hon. Friend either for approval or rejection. If I can look again at the matter with a little more care, in what we normally regard as the morning, I will write to my hon. and gallant Friend if I am wrong about this, but we have not firmly closed our minds to the possibilities that he mentioned. But the initiative must come upwards, and the first initiative must be to find an industrial firm that is willing to move and to put in an application accompanied by an I.D.C.

Sir F. Markham: May I thank my hon. Friend the Parliamentary Secretary for his helpful reply and say that it would be easier to get an I.D.C. if Wolverton were regarded by the Ministry in the same light as Bletchley. I hope that we may be able to get over this hurdle in the near future.

Question put and agreed to.

Adjourned accordingly at ten minutes past Two o'clock.